Federal Incentives
Established by the federal Energy Policy Act of 2005,
the federal tax credit for residential energy property initially
applied to solar-electric systems, but was capped at $2,000. The Energy Improvement and Extension Act of
2008 (H.R. 1424), effective January 1, 2008, included key
revisions, such as an eight-year extension of the credit to
December 31, 2016, the ability to take the credit against the
alternative minimum tax, and the removal of the $2,000 credit limit
for solar-electric systems beginning in 2009. The credit was
further enhanced in February 2009 by The American Recovery and Reinvestment Act of
2009 (H.R. 1: Div. B, Sec. 1122, p. 46), which removed the
maximum credit amount for all eligible technologies (except fuel
cells) placed in service after 2008.
A taxpayer may claim a credit of 30% of the expense to have solar
installed on the residence. If the federal tax credit exceeds tax
liability, the excess amount may be carried forward to the
succeeding taxable year. The excess credit can be carried forward
until 2016.
Solar-electric property
- There is no maximum credit for systems placed in service after
2008. The maximum credit is $2,000 for systems placed in service
before January 1, 2009.
- Systems must be placed in service on or after January 1, 2006,
and on or before December 31, 2016.
- The home served by the system does not have to be the
taxpayer's principal residence.
- Note that the Solar Energy Industries Association (SEIA) has
published a three-page document that provides answers to
frequently asked questions regarding the federal tax credits for
solar energy.