A federal "energy credit" allows businesses to take a 30% tax credit for
renewable energy equipment (solar electric, solar thermal and wind
powered systems). The same incentive is available for residential
customers.
In addition, there is an accelerated 5-year depreciation schedule that
allows businesses to write 100% of a system's cost off their taxable
income over the first five years.
In general, credits are available for eligible systems placed in service on
or before December 31, 2016:
Solar. The credit is equal to 30% of expenditures, with no maximum
credit. Eligible solar energy property includes equipment that uses solar
energy to generate electricity, to heat or cool (or provide hot water for
use in) a structure, or to provide solar process heat. Hybrid solar lighting
systems, which use solar energy to illuminate the inside of a structure
using fiber-optic distributed sunlight, are eligible. Passive solar systems
and solar pool-heating systems are not eligible. (Note that the Solar
Energy Industries Association has published a three-page document that
provides answers to frequently asked questions regarding the federal tax
credits for solar energy.)
State and Local
The states of California, New Jersey, Pennsylvania, Washington and
others, as well as municipalities like Austin, Texas and Bend, Oregon and
Gainesville, FL offer a rebate or similar payment based on the generating
capacity of the system installed. California offers performance-based
payments as an alternative to a rebate.
Other states offer various rebates and incentives to homeowners to lower
the installed cost of a utility-connected power system. Go to
www.dsireusa.org for the latest comprehensive information about
incentives in your area.
State of Florida incentive amounts for each solar technology
are as follows:
Solar PV Systems
- Residential: $4/watt DC, up to $20,000
- Commercial, Non-profit, Multi-Family and Public Facilities:
$4/watt DC, up to $100,000
Solar Water Heating Systems
- Residential: $500 per installation
- Commercial, Non-profit, Multi-Family and Public Facilities:
$15 per 1,000 BTU per day, up to $5,000 (BTUs must be metered)
Solar Thermal Pool Heaters
- $100 per installation
* Applications for the rebate must be submitted within 120 days of the purchase of the solar energy equipment
If I receive a rebate for my system from my state or local government,
does that reduce the basis on which I can claim the federal 30% ITC?
A rebate received in a commercial context must usually be reported as
taxable income by the recipient. A recipient who must report a rebate as
income claims the gross amount paid for solar equipment as his
"tax basis" in the equipment for purposes of calculating the commercial
solar tax credit or Treasury cash grant. Grants from state or local
governments must ordinarily be reported as taxable income and do not
reduce the tax basis for calculating the 30% tax credit for the equipment
whose purchase price is paid in part with the grant.
If I receive a rebate for my system from my utility, does that reduce
the basis on which I can claim the federal 30% ITC?
A rebate received from a utility in a commercial context usually must be
reported as taxable income by the recipient. A recipient who must report
a rebate as income claims the gross amount paid for solar equipment as
his "tax basis" in the equipment for purposes of calculating the commercial
solar tax credit or Treasury cash grant.A rebate received by a homeowner
in a residential context usually does not have to be reported as income
when the rebate is received from the local utility. A homeowner who does
not report the rebate as income takes a "tax basis" in solar equipment
equal to the net amount he paid. In other words, if the solar equipment
has a gross cost of $20,000, but a rebate from the local utility pays $2,000,
then his tax basis in the equipment for purposes of calculating the
residential tax credit is $18,000.
Can I take the 30% federal grant instead of the 30% tax credit?
The grant program option applies only to commercial systems and does
not apply to residential systems.The owner of new solar equipment put to
commercial use and placed in service in 2009 or 2010 qualifies potentially
for a 30% cash grant from the US Treasury. The owner would receive this
grant in place of the commercial tax credit. The grant will be paid within 60
days after the equipment is placedin service or, if later, after the application
is submitted and approved for the grant. Grants will also be paid on
commercial solar systems on which the owner commences construction in
2009 or 2010, provided the system is placed in service by 2016.
If I build a new house for sale, can I take the residential credit or the
commercial credit?
The homebuilder is not usually entitled to the tax credit. The commercial
credit can only be claimed on solar equipment put to commercial use. It is
claimed by the person who owns the equipment when it is placed in
service. A homebuilder does not usually place a house in service, unless
he retains ownership of the house and uses it as a rental property.
In most situations where someone builds a house and sells it with solar
equipment already installed, the new homeowner is the one entitled to
any tax credit. He claims a residential credit. He must use the house as
his residence.
If I don't have enough tax liability to take the full tax credit in the year
my system is installed, can I apply the remainder of the credit to the
following years' taxes?
Unused commercial credits can be carried forward for up to 20 years.
Unused residential credits can be carried forward at least until tax year
2016 (the year the residential credit expires). It is unclear whether
residential credits can be carried forward past 2016.
What if I have to sell my house, can I still claim the credit?
The residential credit is not recaptured if the house is later sold. However,
the homeowner will have had to have reduced his tax basis in the house
by the amount of the credit. He is more likely to have again on sale.
Does the 30% credit cover the cost of installation labor?
The cost of labor to install solar equipment goes into the "basis" for
calculating the credit. However, only labor tied to eligible solar equipment
goes into the basis. Thus, for example, if part of the labor is for replacing
a roof under the solar panels, that part would not count.
Is there a standard tax form for claiming the 30% credit?
If so, where can I find it? The commercial credit is claimed on IRS Form
3468. The residential credit is claimed on IRS Form 5695. Tax forms can
be found at www.irs.gov. However, the 2009 forms may not be available
yet on the IRS website as the agency is updating them to reflect the
changes in the "American Recovery and Reinvestment Act" signed into
law February 17, 2009.
I installed my residential system in 2008. Can I claim the full 30%
credit?
You can claim a credit only up to the cap of $2,000 per system that was
installed before 2009. There is no cap for PV or solar thermal systems
installed after 2008.
I received government loans to finance my system, does that
affect the credit I can claim?
Any government loan considered "subsidized energy financing" ---- and
most should be ---- is used to reduce the "basis" on which the credit is
calculated before 2009. For the commercial credit, if the system was
partly constructed before 2009, then there will be reduction in basis for
the share of the cost incurred before 2009 that was financed with such a
loan. For the residential credit, there is no reduction on account of such
a loan for any system on which installation was completed after 2008. It
does not matter if work started in 2008
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