Investing in solar energy makes more business sense than ever. Financial incentives from the Federal government and States are unprecedented in encouraging companies to invest in alternative energy systems.
By taking advantage of tax credits, grants as well as corporate deductions and exemptions offered by Federal and States governments, homeowners and businesses can reduce the cost of their investment in a solar thermal system by up to 50%. Federal and State loan programs are also available to help with financing.
News: FEDERAL
ENERGY GRANTS
Federal energy
grants obtainable through
the Department of Treasury give immediate aide to business
owners who install a thermal solar system between 2009 and 2010 by
replacing the 30% investment tax credits with up-front cash...more
Tax Incentives FAQ (from sela.org)
What are the tax incentives for
solar thermal systems?
Businesses and consumers are eligible
for tax credits for qualified Solar Thermal Systems which provide hot
water to a structure. The credits are available for systems "placed in
service" between January 1, 2006 and December 31, 2016.
Note: This is a basic guide to the credit. For more detailed
information, go to www.seia.org and
download the Guide to Federal Tax Incentives for Solar Energy, or
SEIA's FAQs regarding the new legislation.
Who is eligible for the tax incentives?
The tax credits go to businesses that
install solar equipment for their use, and to individuals who install
qualifying systems on homes they use as a residence (unlike other
consumer incentives, the dwelling does not have to be the taxpayer's
primary residence - rental properties, second homes are eligible).
In the case of cooperative apartment buildings owned by a corporation,
SEIA states that "if the corporation spends money on installing
qualified solar property, each shareholder is allowed to claim
residential solar tax credits on his or her share of the spending."
In the case of condominiums, SEIA reports that when the condominium
management association "spends money on installing qualified solar
property, each member of the association can claim the residential
solar tax credits on his or her share of that spending," so long as the
management association qualifies as a homeowners' association under the
law, and the majority of the units in the condominium are used as
dwelling units.
How do the incentives work?
The tax credits are for 30% of the
cost of the system. For systems installed before January 1st, 2009, the
maximum credit for individuals is $2000 for solar water heating
systems. Systems installed after December 31, 2008 are not subject to a
cap. To qualify, Solar water
heating systems must meet certain
criteria as follows:
1 - System must be certified for performance by the Solar Rating
Certification Corporation (SRCC) or a comparable entity endorsed by the
state government in which the system is located. SRCC is an
organization set up by the solar industry to test and certify equipment
so purchasers have an independent assessment of system performance.
2 - At least half of the energy used
by the system to heat the water must be solar energy. The credit is not
available for expenses for swimming pools or hot tubs.
Alternative Minimum Tax and the Residential Solar Tax Credit
According to SEIA, the new legislation passed in October of 2008
"allows individual taxpayers to use the credit to offset AMT liability,
and to carry unused credits forward to the next succeeding taxable
year."
What do I have to do to qualify for these incentives?
To qualify, tax payers will need to have evidence regarding:
* the cost of the system (including labor and piping or wiring to
connect the system to a home's plumbing and/or electrical systems),
* when it was placed in service,
* whether the system meets the qualifying criteria discussed above.
For taxpayers installing water heating systems at their residence, use
the Residential Energy Efficient Property Form 5695. For corporate
taxpayers, use Form 3468 for Commercial Solar Incentives (Investment
Credit).
HOW TO CLAIM
YOUR FEDERAL TAX CREDIT?
Residential 30% Income Tax Credit
The 30% credit for solar and for
certain other high-efficiency appliances (including many instantaneous
gas-fired water heaters) is filed on form 5695, available at: http://www.irs.gov/pub/irs-pdf/f5695.pdf
No system documentation needs to be sent with the tax form, but you
should keep a copy of your equipment invoice and type of collector
installed so that you can provide the SRCC certification or other
rating information
if requested. You can claim 30% of the cost.
30% Investment
Tax Credit (ITC)
Any commercial entity which invests in or purchases qualified solar
energy property can take credit.
The main applicable paperwork is IRS Form 3468 available at: http://www.irs.gov/pub/irs-pdf/f3468.pdf
There are also Instructions for Form 3468 at: http://www.irs.gov/pub/irs-prior/i3468--2008.pdf
Enter information on line 8a of Form 3468.
For a sole proprietorship the tax credit comes back into Form 1040 on
line 50; for corporations it goes onto Form 1120, Schedule J, line 6d;
Form 1120-A, Part I, line 4a; Form 1041, Schedule G, line 2c; or the
applicable line of your return.
The Federal definition of a qualified
solar energy property is:
1.
Equipment that uses solar energy to generate electricity, to heat or
cool (or provide hot water for use in) a structure, or to provide solar
process heat.
HOW TO CLAIM YOUR STATE TAX CREDIT?
DSIRE is a comprehensive source of information on state,
local, utility, and federal incentives and policies that promote
renewable energy and energy efficiency.
Find out what incentives are
available in your State:
www.dsireusa.org
Always consult with your tax advisor when considering an investment.
