Residential Renewable Energy Credit

Note: The Consolidated Appropriations Act, signed in December 2015, extended the expiration date for PV and solar thermal technologies, and introduced a gradual step down in the credit value for these technologies. The credit for all other technologies will expire at the end of 2016.

The federal government allows you to claim a tax credit of up to 30 percent of your costs toward solar electric systems. To qualify, fuel cells must have a minimum of 0.5 kW, an electricity generation efficiency of at least 30 percent, and at least 50 percent of the home’s heating energy must come from solar energy.

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned 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 at a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site 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 maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

 

Solar-electric property

30% for systems placed in service by 12/31/2019
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating property

30% for systems placed in service by 12/31/2019
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
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.

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 0.5 kW. 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.