Residential Renewable Energy Tax Credit

Residential Renewable Energy Tax Credit

Lower Taxes, Cleaner Air, Healthier Planet

Pay Less Tax With Renewable Energy  

Great news for homeowners! Alternative power systems are now even more cost effective, as they can claim back up to 30% of their expenditures on these environmentally friendly systems. These outlays encompass labor costs incurred for on-site preparation, assembly and installation, as well as the necessary piping or wiring connecting your system to your home. And if your costs top the credit ceilings for your equipment, you can carry any excess amounts forward into the next taxable year. Check the following lists to find out how you can save money while protecting our planet as well.

Solar electricity systems

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2006, and December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating systems

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2006, and December 31, 2021.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by local State governments.
  • At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating system expenditures to be eligible.
  • The tax credit does not apply to solar water-heating systems for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer’s principal residence.

In February 2018, the Bipartisan Budget Act reinstated tax credits for fuel cells, small-scale wind systems and geothermal heat pumps, as follows.

 Fuel cell systems

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • The maximum credit is $500 per half kilowatt (kW).
  • Systems must be operative between January 1, 2006, December 31, 2021.
  • The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
  • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs paid by each of them.
  • The home served by the system must be the taxpayer’s principal residence.

Small-scale wind systems

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2008, December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Geothermal heat pumps

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2008, and December 31, 2021.
  • Geothermal heat pumps must meet federal Energy Star criteria.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Solar-electric equipment

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2006, and December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating equipment

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2006, and December 31, 2021.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by local State governments.
  • At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating equipment expenditures to be eligible.
  • The tax credit does not apply to solar water-heating equipment for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Fuel cell equipment

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • The maximum credit is $500 per half kilowatt (kW).
  • Systems must be operative between January 1, 2006, December 31, 2021.
  • Must have a nameplate capacity of at least 0.5 kW, using an electrochemical process and an electricity-only generation efficiency greater than 30%.
  • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs paid by each individual.
  • The home served by the system must be the taxpayer’s principal residence.

Small wind-power equipment

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2008, December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Geothermal heat pumps

  • 30% for systems operative by 12/31/2019
  • 26% for systems operative between 12/31/2019 and 01/01/2021
  • 22% for systems operative between 12/31/2020 and 01/01/2022
  • No credit ceiling on systems operative before 2008.
  • Systems must be operative between January 1, 2008, and December 31, 2021.
  • The geothermal heat pump must meet federal Energy Star criteria.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Energy Storage

Although the US Tax Code offers no tax credits for stand-alone energy storage facilities, two Private Letter Rulings (issued in 2013 and 2018 by the IRS) confirm that energy storage equipment complies with the official definition of qualified solar electric equipment when paired with photovoltaic (PV) systems. Homeowners should note that Private Letter Rulings do not establish precedents, and are valid only for the applicant taxpayers. So if you’re thinking about investing in an energy storage system, first check out your best options with a tax expert or your accountant.

Background

Initially covering only fuel cells, solar-powered electricity and water heating systems, residential energy credits on federal taxes were introduced in 2005 by the Energy Policy Act. In January 2008, tax credits were extended to small-scale wind power systems and geothermal heat pumps through the Energy Improvement and Extension Act, followed by an eight-year extension of the credit through to year-end 2016. Homeowners were allowed to offset the alternative minimum tax against these credits; the $2000 credit ceiling on solar-powered electricity systems was lifted in 2009; and the credit ceiling was removed for all technologies eligible for subsidized energy financing (except fuel cells) coming into operation between December 31, 2008, through the American Recovery and Reinvestment Act in 2009.

 

 



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