Residential Renewable Energy Federal Tax Incentives

The American Recovery and Reinvestment Act of 2009 extended many consumer tax incentives originally introduced in the Energy Policy Act of 2005 (EPACT) and amended in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343).

Consumers who install residential small wind systems with a nameplate capacity of not more than 100 kilowatts can receive a 30% tax credit for systems placed in service before December 31, 2016; the previous tax credit cap no longer applies. This Residential Renewable Energy Tax Credit also applies to solar energy systems (including solar water heating and solar electric systems), geothermal heat pumps, and residential fuel cell and microturbine systems. There is no maximum credit for systems placed in service after 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.
  • Use IRS Tax Form 5695 for filing (a 2009 version will be available in late 2009 or early 2010.)

Information is available at the federal EnergyStar web site:
Federal Tax Credits for Energy Efficiency

A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Consumers can itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.

IRS Notice 2009-41 provides the guidelines for this tax crredit.

In addition to federal tax incentives, some consumers will also be eligible for utility or state rebates, as well as state tax incentives for energy-efficient home improvements. Each state's energy office web site may have more information on specific state tax information.

The Database of State Incentives for Renewables & Efficiency provides information and links to resources for individual states.

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