May 262011
 
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In addition to offering a green source of providing utilities to your home, solar panels also are offer a sizable tax benefit to the homeowner. The federal government gives a sizable tax break and many state governments have tax benefit programs in place.

The federal program is under the American Recovery and Reinvestment Act and is detailed within the Consumer Energy Tax Incentives under Residential Renewable Energy Tax Credits. The clause states, “Consumers who install solar energy systems (including solar water heating¬†and solar electric systems), small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems can receive a 30% tax credit for systems placed in service before December 31, 2016; the previous tax credit cap no longer applies.”Simplified this program allows for 30% of the system cost to be credited without a cost cap. It is available only on your new and existing primary residence and a second home. No credit may be taken on a rental unit. The expiration date is December 31, 2016. Your system must provide electricity to the residence and meet fire and electrical code requirements

To apply for credits on products placed in service, file the 2011 IRS Form 5695 and include it with your 2011 taxes when filed with the IRS on or before April 15, 2012. On your 1040 form the residential energy tax credit is reported and claimed on line 52 using figures from Form 5695. Save all associated receipts and also the Manufacturer’s Certification Statement for your own records. Submit IRS Form 5695 with your taxes.

Many state government also have tax credits available to qualifying residences and homes. There are differing qualifications from the federal credits so ask the solar installers in your area for information on credits and the application process. Most installers or solar sales companies will have this information and can help you with the qualification process Take the time to research the state tax website for details as well.

Josh T. is an avid reader and in his spare time he helps people with tax questions. When he is not helping others, he works for a tax resolution firm.

 

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