 Residential
Solar - Federal Tax Credit - 2006 & 2008
Incentive 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
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: Energy
Policy Act of 2005 (Section 1335)
Date Enacted: 8/8/2005
Effective Date: 1/1/2006
Expiration Date: 12/31/2008
Summary: The Energy Policy
Act of 2005 (H.R. 6) 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, 2008. 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
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