Residential Solar
- Federal Tax Credit - 2006 & 2007
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: 12/31/2007
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, 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