See the entire bill, including Division B: Energy Improvement and Extension Act of 2008. As part of this legislation, the solar investment tax credit (ITC) has been extended for 8 years through December 31, 2016.
Here are the key provisions of the ITC:
- The 30% federal investment tax credit for both residential and commercial solar installations is extended for 8 years through December 31, 2016.
- Eliminates the $2,000 cap on the tax credit for the purchase and installations of solar electric on residential properties.
- Addition of small wind energy and geothermal heat pump projects as qualifying installations for tax credits
- Utilities may now benefit from the credit as eligible tax credit recipients.
- Extends through 2009 the authority to issue clean renewable energy bonds.
Residential Tax Credit. Tax incentives include tax credits and depreciation. The Federal Investment Tax Credit for Residential is 30 percent of net system cost, capped at $2,000 (prior to 12/31/08 and no cap afterwards). It is a one-time credit, but may be carried forward (and possibly back) if not completely useable in the system installation tax year. Also, the IRS hasn't produced the form required for claiming this credit for individual filers.
Commercial Tax Credit. The Federal Investment Tax Credit for Commercial and Business owned systems is 30 percent of net system cost with no cap. The IRS current federal Form 3468 is available at www.irs.gov/formspubs. In the past, this credit could be carried forward fifteen or back three years. It's not clear if this has changed.
MACRS Business Incentive. Business owned systems may also be eligible for MACRS 5-year Accelerated Depreciation using IRS federal form 4562. For more info on commercial tax benefits and for updates on the CSI & IRS rules and forms, see the online version of the article at: www.ongrid.net/papers/PaybackOnSolarSERG.pdf.
Additional Information Sources. A source for information on all state and federal incentive programs around the country is available at the DSIRE project: www.dsireusa.org. In addition, the Solar Energy Industries Association (www.seia.org) has put together a "Guide to Federal Tax Incentives for Solar Energy," available for free at www.seia.org/manualdownload.php.
Value of Tax Incentives. Residential customers in higher income tax brackets see comparatively more value because residential electricity expenses are paid with after-tax dollars-they aren't tax deductible.
Incentive Tax Treatment. Tax treatment of the incentives depends on the type of customer, and possibly the type of incentive. For additional information on tax treatment, see the online version of the article at: www.ongrid.net/papers/PaybackOnSolarSERG.pdf. Of course, municipal and non-profit entities do not have to worry about these tax issues, as they are generally tax-exempt. More detailed information on solar finance and tax considerations is available from the Northern California Solar Energy Association's Solar Energy Resource Guide, at http://norcalsolar.org. Also see the Tax Incentives Assistance Project (www.energytaxincentives.org/tiap-solar-energy-systems.html) for more information on solar and energy efficiency tax credits.
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Note: The preceding information regarding taxes, tax credits and depreciation is meant to make the reader aware of these benefits, risks and potential expenses, and help avoid claims by aggressive salespeople. It is not tax advice, and the author is not a qualified tax professional. Please seek professional advice from a qualified tax advisor to check the applicability and eligibility before claiming any tax benefits or exemptions.
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