Renewable and Solar Energy Tax Credit

The solar energy tax credit will save you 30% of the cost of your solar energy system or other renewable energy systems. So if you have been thinking of going green now is the time.

When and where do you have to install the renewable energy system to be eligible for the tax credit?

The system needs to be "placed in service", meaning that it must be available for use, between January 1, 2006 and December 31, 2016 to qualify.

Both business owners and homeowners are eligible to receive the credit although the rules about which systems are eligible are different for businesses and homes.

The home that the system is installed in must be the homeowner's residence. It can be either a main home or a second home but not a rental property.

How much is the renewable and solar energy tax credit?

You can get 30% of the actual cost of the cost of the system. There was a credit limit on systems installed before January 1 2009, but those limitations have been removed.

Although the credit is not refundable and you cannot get more than your tax liability the unused part of the credit can be carried over from year to year.

Which renewable energy systems are eligible for the solar energy tax credit?

  • Solar Heating Systems The system must be certified by the SRCC or a comparable organization endorsed by your state.Of the energy used by the system to heat the water at least half of it must be solar energy.
  • Photovoltaic systems are solar energy systems that create electricity. It must provide electricity and meet the applicable fire and electrical code requirements to qualify.Also includes solar fans.
  • Solar lighting systems Only businesses are eligible.Tube systems and passive solar are not eligible
What other energy systems qualify other than the solar energy systems?
  • Wind Systems Only small wind turbines with less than 100 kilowatts of nameplate capacity are eligible.
  • Geothermal Heat Pumps These pumps use the ground or ground water as thermal energy to provide heating or cooling to a residence. Units must meet energy star requirements. This renewable energy system became eligible for the credit later than the others, January 1, 2008. Businesses can only take a 10% credit for the Geothermal pumps. This energy option for businesses started only on October 3, 2008.

Manufacturers of all the renewable energy systems mentioned above may qualify for an investment credit.

What do you need to do to claim the solar energy tax credit?

You need to file Form 5695 - Residential Energy Efficient Property. Corporate taxpayers file Form 3468 - Commercial Solar Incentives (Investment Credit).

This is the information you need the be able to file these forms:

  • the cost of the system (for solar energy systems include the labor and piping or wiring to connect the system to the existing plumbing and/or electricity.)
  • date when it was placed in service
  • proof that the system is eligible for the credit.

Updated December 30, 2012

Go to Federal Energy Tax Credit

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