Consumer Tax Incentives
Solar Energy Systems
What are the tax incentives for residential solar systems?
Homeowners are eligible for tax credits for qualified solar water heating and photovoltaic systems. Solar water heating systems produce hot water, photovoltaic systems produce electricity. The credits are available for systems "placed in service" between January 1, 2006 and December 31, 2016.
Note: This is a basic guide to the credit. For more detailed information, go to www.seia.org and download the Guide to Federal Tax Incentives for Solar Energy, or click here for recent FAQs regarding the new legislation.
Who is eligible for the tax incentives?
The tax credits go to individuals who install qualifying systems on homes they use as a residence.
In the case of cooperative apartment buildings owned by a corporation, SEIA states that "if the corporation spends money on installing qualified solar property, each shareholder is allowed to claim residential solar tax credits on his or her share of the spending."
In the case of condominiums, SEIA reports that when the condominium management association "spends money on installing qualified solar property, each member of the association can claim the residential solar tax credits on his or her share of that spending," so long as the management association qualifies as a homeowners' association under the law, and the majority of the units in the condominium are used as dwelling units.
What are the incentives and how do they work?
The tax credits are for 30% of the cost of the system. For individuals the maximum credit is $2000 for photovoltaic systems and $2000 for solar water heating systems in any tax year. After December 31, 2008, the cap on photovoltaic systems ONLY will be removed. To qualify, residential systems must meet certain criteria as follows:
Solar water heating:
- System must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the state government in which the system is located. SRCC is an organization set up by the solar industry to test and certify equipment so purchasers have an independent assessment of system performance www.solar-rating.org
- At least half of the energy used by the system to heat the water must be solar energy. The credit is not available for expenses for swimming pools or hot tubs.
- System must provide electricity for the residence, and must meet applicable fire and electrical code requirement.
Alternative Minimum Tax and the Residential Solar Tax Credit
According to SEIA, the new legislation passed in October of 2008 "allows individual taxpayers to use the credit to offset AMT liability, and to carry unused credits forward to the next succeeding taxable year."
What do I have to do to qualify for these incentives?
To qualify, tax payers will probably need to have evidence regarding:
- the cost of the system (including labor and piping or wiring to connect the system to a home's plumbing and/or electrical systems),
- when it was placed in service,
- whether the system meets the qualifying criteria discussed above.
Where can I learn more about qualifying products?
Good sources of information about these systems include: