Are you interested in going solar? If so, the federal government has a program in place that might interest you.
The Federal Tax Credit for Energy Efficiency is an incentive program to encourage residential energy efficiency. Homeowners who upgrade their homes with qualifying energy efficient improvements may be entitled to a tax credit.
Although most of these improvements have an upper limit on the tax credit a homeowner is entitled to in a year, there’s no upper limit on the tax credit when installing solar energy systems and upgrades. Without a cap, 30% of the total cost of a solar energy system can be used as a dollar-for-dollar reduction on your federal taxes.
It’s important to understand that these energy efficiency tax credits are essentially “nonrefundable”. This means that you can’t get more of a tax credit than what you pay in federal taxes. Fortunately for us taxpayers, the unused portions of this tax credit can be carried forward if we are unable to claim the entire 30% purchase price of a solar upgrade in a given year.
So what exactly are some of the details for receiving the 30% solar energy tax credit? From the Energy Star website, here’s a brief summary;
1. Both existing homes and new homes outfitted with solar energy upgrades qualify for the Tax Credit. While rentals don’t qualify, your primary residence and secondary home do qualify.
2. The solar energy upgrades must be in use by December 31, 2116.
3. You must use products with a Manufacturer’s Certification Statement. This is a signed statement from the manufacturer certifying that their product qualifies for the federal tax credit. Qualifying solar energy products include:
* Solar panels (photo voltaic systems) which capture light energy from the sun and convert it into electricity. These solar panels must provide electricity for the residence and meet both fire and electrical codes. The credit includes installation costs, and the piping and wiring necessary to connect the house to the solar energy system.
* Solar water heaters, providing that at least half the energy used in the residence comes from the sun. The tax credit includes installation costs.
* The solar panel portion of a solar fan.
To apply for the Energy Efficiency Tax Credit for your solar water heater or solar panels, you’ll need the IRS Form 5695 and keep all receipts and Manufacturer’s Certification Statements for your records. For more details about qualifying solar energy systems, check out the Department of Energy’s Energy Star program, located at energystar.gove.
Form 5695 complete with instructions in a .pdf format.