Solar Power & Tax Breaks
Solar power is energy produced from sunlight in the form of heat or electricity. Solar power produces virtually no pollution, and operating costs are low. Federal and state solar power tax incentives help individuals install solar power systems. The goal is to promote energy efficiency, protect the environment and reduce dependence on foreign energy sources.
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General Requirements
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Energy Savers says you can get substantial federal tax credits for purchasing and installing solar water heating and solar electricity production systems in a residence. These credits are good for systems placed in service by Dec. 31, 2016. The residence can be a new or an existing structure but must be a primary or second home. Toward the end of 2010, Congress passed legislation that modified and extended some energy efficiency tax incentives, but these did not affect solar power systems.
Photovoltaic Systems
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A photovoltaic system, commonly called solar panels, produces electricity from sunlight. You can get a tax credit for 30 percent of the cost of the system with no upper limit. The electricity produced must be for use in the home where it is installed. Photovoltaic systems must comply with safety and fire codes. The credit is available for small solar systems that are suitable for use in second homes located in out-of-the-way places where connecting to conventional power lines is difficult or impossible.
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Solar Water Heaters
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A solar water heater may use only sunlight to heat water or it may supplement a conventional system. To qualify for the tax credit, the system must get 50 percent or more of the heat energy used from the sun. The credit is for 30 percent of the cost, including installation, and there is no upper limit. Solar water heaters must be for in-home use and can include hot tubs and swimming pools. Systems must be certified by the Solar Rating and Certification Corp.
Considerations
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In addition to federal tax credits, many states offer tax deductions or credits for solar power systems. These vary from state to state. You can find information about your state's solar power tax incentives online through the Database of State Incentives for Renewable Energy (DSIRE). It's also important to keep abreast of federal programs. It is likely that Congress will make further changes from time to time.
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