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  • - A radical idea to get a high-renewable electric grid

    This is an interesting approach to optaining very high penetration of renewables such as photovoltaics and wind.  At present most large installations operate under Power Purchase Agreements (PPA) wherein the economics are based on a sell all output at predetermined prices. This contrasts with standalone systems wherein the system size Read More
  • - Breakthrough Batteries Powering the Era of Clean Electrification

    - Breakthrough Batteries Powering the Era of Clean Electrification Battery Storage Costs Drop Dramatically, Making Way to a New Era. A recent Rocky Mountain Institute (RMI) report continues to confirm that clean electrification through batteries is advancing at impressive rates. Very interesting report: Breakthrough Batteries- Powering the Era of Clean Electrification Read More
  • - Interesting Technology

    An assortment of links to interesting information   Semiconductor Nanowires Could Double the Efficiency of Silicon Solar Cells A p/n semiconductor junction is not the only way of converting sunshine into useful electrical energy.  Light consists of a flow of photons of various energy levels (colors).  See this article-Solar Cells.  Nanowires Read More
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(Information provided by DSIRE - Last reviewed 02/19/2009)


Incentive Type:   Personal Tax Credit
State:   Federal
Eligible Renewable/Other Technologies:   Solar Water Heat, Photovoltaics, Wind, Fuel Cells, Geothermal Heat Pumps, Other Solar Electric Technologies
Applicable Sectors:   Residential
Amount:   30%
Maximum Incentive:   Solar-electric systems placed in service before 2009: $2,000
Solar-electric systems placed in service after 2008: no maximum
Solar water heaters placed in service before 2009: $2,000
Solar water heaters placed in service after 2008: no maximum
Wind turbines placed in service in 2008: $4,000
Wind turbines placed in service after 2008: no maximum
Geothermal heat pumps placed in service in 2008: $2,000
Geothermal heat pumps placed in service after 2008: no maximum
Fuel cells: $500 per 0.5 kW
Carryover Provisions:   Excess credit may be carried forward to succeeding tax year
Eligible System Size:   Fuel cells: 0.5 kW minimum
Equipment/Installation Requirements:   Solar water heating property must be certified by SRCC or by comparable entity endorsed by the state in which the system is installed. At least half the energy used to heat the dwelling's water must be from solar. Geothermal heat pumps must meet federal Energy Star requirements. Fuel cells must have electricity-only generation efficiency greater than 30%.
Authority 1:   26 USC § 25D
Date Enacted:   8/8/2005 (subsequently amended)
Date Effective:   1/1/2006
Expiration Date:   12/31/2016
Authority 2:   IRS Form 5695 & Instructions: Residential Energy Credits

 



Summary:
Note: The American Recovery and Reinvestment Act of 2009 does not allow taxpayers eligible for the residential renewable energy tax credit to receive a U.S. Treasury Department grant instead of taking this credit. 

Established by the federal Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar-electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008(H.R. 1424) extended the tax credit to small wind-energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2016, the ability to take the credit against the alternative minimum tax, and the removal of the $2,000 credit limit for solar-electric systems beginning in 2009. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009 (H.R. 1: Div. B, Sec. 1122, p. 46), which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for onsite preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit can be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.


Solar-electric property

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer's principal residence.
  • Note that the Solar Energy Industries Association (SEIA) has published a five-page document that provides answers to frequently asked questions regarding the federal tax credits for solar energy.


Solar water-heating property

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • At least half the energy used to heat the dwelling's water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer's principal residence.
  • Note that the Solar Energy Industries Association (SEIA) has published a five-page document that provides answers to frequently asked questions regarding the federal tax credits for solar energy.


Fuel cell property

  • The maximum credit is $500 per half kilowatt (kW).
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
  • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per half kilowatt. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he or she paid.
  • The home served by the system must be the taxpayer's principal residence.


Small wind-energy property

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $500 per half kilowatt, not to exceed $4,000, for systems placed in service in 2008.
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer's principal residence.


Geothermal heat pumps

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service in 2008.
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The geothermal heat pump must meet federal Energy Star program requirements in effect at the time the installation is completed.
  • The home served by the system does not have to be the taxpayer's principal residence.


Significantly, The American Recovery and Reinvestment Act of 2009 repealed a previous limitation on the use of the credit for eligible projects also supported by "subsidized energy financing." For projects placed in service after December 31, 2008, this limitation no longer applies.  


History 
The federal Energy Policy Act of 2005 established a 30% tax credit (up to $2,000) for the purchase and installation of residential solar electric and solar water heating property and a 30% tax credit (up to $500 per 0.5 kilowatt) for fuel cells. Initially scheduled to expire at the end of 2007, the tax credits were extended through December 31, 2008, by the Tax Relief and Health Care Act of 2006.  

In October 2008, the Energy Improvement and Extension Act of 2008 extended the tax credits once again (until December 31, 2016), and a new tax credit for small wind-energy systems and geothermal heat pump systems was created. In February 2009, The American Recovery and Reinvestment Act of 2009 removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

 


Contact: 
Public Information - IRS 
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040 
Web Site: http://www.irs.gov

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    About The Arizona Solar Center Arizona Solar Center Mission- The mission of the Arizona Solar Center is to enhance the utilization of renewable energy, educate Arizona's residents on solar technology developments, support commerce and industry in the development of solar and other sustainable technologies and coordinate these efforts throughout the state of Arizona. About the Arizona Solar Center- The Arizona Solar Center (AzSC) provides a broad-based understanding of solar energy, especially as it pertains to Arizona. Registered Read More
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