Solar tax credit information

Always consult your tax advisor.
A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for onsite preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. 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, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

Download IRS form 5695 for Residential Energy Credits
 
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.

 
Solar water-heating 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.  
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.  
  • 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.  
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.  
  • 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.

 
Fuel cell property

  • The maximum credit is $500 per half kilowatt (kW).  
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.  
  • 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 half kilowatt. 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 he or she paid.  
  • The home served by the system must be the taxpayer’s principal residence.

 
Small wind-energy property

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $500 per half kilowatt, not to exceed $4,000, for systems placed in service in 2008.  
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.  
  • The home served by the system does not have to be the taxpayer’s principal residence.

 
Geothermal heat pumps

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service in 2008.  
  • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.  
  • The geothermal heat pump must meet federal Energy Star program requirements in effect at the time the installation is completed.  
  • The home served by the system does not have to be the taxpayer’s principal residence.

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