What are Federal Solar Tax Credits and Rebates?

Learn more about federal incentive tax credits (ITC) and rebate programs for solar photovoltaic systems

Federal Incentive Tax Credits (ITC) for Solar in the US

Solar energy is considered the biggest winner of the United States Emergency Economic Stabilization Act of 2008, which provides a tax credit of 30% for solar PV installations until 2016.

Tax Credits

The tax credit is equivalent to 30% of expenditures with no maximum credit*. Credit redemption works in two ways. The first of these is to deduct the credit amount from taxes owed. The second relates to federal tax refunds wherein, if after filing, a refund is due the tax credit will be added to the refund amount.

Under the EESA taxpayers qualifying for the federal renewable electricity production tax credit (PTC) may take an Investment Tax Credit (ITC) or receive a grant from the U.S. Treasury Department for new installations. The treasury grant is only applicable to systems constructed before December 31, 2011.

Can I take a federal tax credit for my solar PV system?

If you are a residential or commercial property owner and have or plan to install a Solar PV system between 2008-2016 to:

a. Generate Electricity
b. Heat, cool, or provide hot water for use in a structure
c. Provide Solar process heat
d. Utilize hybrid solar lighting systems **

You will qualify for a federal tax credit under the Emergency Economic Stabilization Act.

Several provisions including the American Recovery and Reinvestment Act of 2009 have worked to expand federal and state qualifying recipients. A database of State and Federal tax credit information may be found at DSIRE. DSIRE was founded in 1995, by the U.S. Department of Energy.

Maximizing Credits

Since the Emergency Economic Stabilization Act was designed to increase consumer demand and renewable energy jobs, the bill also authorizes $800 million in Qualified Energy Conservation Bonds, to help finance efficiency improvements. These bonds are issued by state and local governments and can be applied to a wide range of energy efficiency projects including research and demonstration.

Additional qualifying sectors include:

a. Residential/Commercial
b. Industrial/Agricultural
c. Federal Government
d. Local Government
e. Non-profit
f. Schools
g. State Government
h. Utilities

There are 29 incentive categories available under the above qualifying sectors that encompass 52 forms of renewable technologies. Solar Technologies include - Solar Photovoltaics, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, and Solar Water Heat. Many independent appliances are listed under renewable technologies.

To learn more visit DSIRE Search for a drop down list of applicable credits in your state. For up to date news and information you may wish to follow DSIRE on Facebook or Twitter.

Financial Incentives

Due to the wide range of eligible sectors and technologies included under the EESA it is important to know what to look for.

Here is a quick list of key terms to help you refine your search, maximize benefits, and calculate your savings. 

a. Corporate Tax Incentives
b. Grant Programs
c. Green Building Incentives
d. Industry Recruitment/ Support
e. Leasing Programs
f. Loan Programs
g. PACE Financing
h. Performance-based Incentives
i. Personal Tax Incentives
j. Property Tax Incentives
k. Rebate Programs
l. Sales Tax Incentives
m. Utility Rate Discounts

Solar Energy International offers workshops, business services, and out reach programs to empower people through education and hands on training.

Impressive Strides

Government investments in renewable energy, solar PV panel manufacturing cost reductions, and consumer credits have led to a growing number of “green” improvements to pre-existing structures. It is exciting to note that the market is also expanding to include structural design and development that will utilize renewable energy at every phase of construction for new structures and communities:  Award Winning Green Homes. In many cases the amount of energy efficiency savings over a twenty-five to thirty year span pays not only for the installation but the structure itself (approx. $200,000).

Rebates and credits primarily focus on grid-tie solar PV systems. The SMART GRID is a new initiative focused on modernizing electric grids for access to remote sources of solar and wind energy. Through the Recovery Act $4.5 billion have been allocated for Smart Grid investments, demonstration, and capacity building with more federal budget proposals to come in 2012.

As always, don't rely on this (or any) article as tax or financial advice. Most tax accountants now are fully versed in energy tax credits and can give you advice relevant to your particular tax situation.

*Unused tax credits may be applied to the next tax year.
**Hybrid solar lighting systems must use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight to be eligible

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Comments

Thanks for this article.  You also might want to checkout the frequently‐asked questions from SEIA’s Guide to Federal Incentives for Solar Energy, written to assist installers and property owners with Solar Energy Incentives Federal Solar Energy Incentives FAQs