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Federal : Residential Solar and Fuel Cell Tax Credit
Type: Personal Tax Credit
Eligible Renewable/Other Technologies: Solar Water Heat, Photovoltaics, Fuel Cells
Applicable Sectors: Residential
Amount: 30%
Maximum Incentive: $2,000 for photovoltaics and solar water heating; $500 per 0.5 kW for fuel cells
Carryover Provisions: Excess credit may be carried forward to succeeding tax year.
Eligible System Size: Not specified
Equipment/Installation Requirements: Solar water heating property must be certified by SRCC or by comparable entity endorsed by the state. At least half the energy used to heat the dwelling's water must be from solar in order for the solar water heating property expenditures to be eligible.
Authority 1: 26 USC § 25D (2005)
Date Enacted: 8/8/2005
Effective Date: 1/1/2006
Expiration Date: 12/31/2007
Summary:
The Energy Policy Act of 2005 (H.R. 6, Sec. 1335) establishes a 30% tax credit up to $2,000 for the purchase and installation of residential photovoltaic (solar electric) and solar water heating property. An individual can take both a 30% credit up to the $2,000 cap for a photovoltaics system and a 30% credit up to a separate $2,000 cap for a solar water heating system. A 30% tax credit up to $500 per 0.5 kW is also available for fuels cells.
Solar water heating property must be certified for performance by the Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which the property is installed. Note that the tax credit does not apply to solar water heating property for swimming pools or hot tubs.
The credit is calculated based on the individual’s expenditures excluding subsidized energy financing, which is defined as "financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy." Consumers who receive other incentives are advised to consult with a tax professional regarding how to calculate this federal tax credit.
If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. Expenditures include labor costs for the onsite preparation, assembly, or original installation of the system and for piping or wiring to interconnect the system to the dwelling.
To be eligible for the credit, a system must be "placed in service" or activated between January 1, 2006, and December 31, 2007. Expenditures with respect to the equipment are treated as made when the installation is completed. This provision is particularly important for expenditures made before 2006 for projects not "placed in service" until 2006. If the installation is on a new home, the "placed in service" date is the date of occupancy by the homeowner. The IRS will be issuing further guidance on claiming this credit.
Contact:
Information Specialist - IRS
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
Phone: (800) 829-1040
Web site: http://www.irs.gov