Tax Incentives available for Residential Solar Projects

Federal and state governments now offer tax breaks to help defer the cost of residential solar projects. They, too, are looking into new ways to expand the use of solar energy for energy consumption and recognize people who are also working towards that end. Here is some information about those tax incentives if you are thinking about using residential solar power.

With any tax incentive you come across, be sure to read it first. Some tax incentives only apply to commercial solar projects. What you want is tax information for residential solar projects.

The federal government has a form, 5695 where you can enter the costs that you have paid for your residential solar power system. Consumers can get a tax credit for up to thirty percent of their total costs up to $1,500 for existing homes through 2010 for home improvements. You can also claim a credit for a solar hot water heater if that is in your residential solar plans. The maximum credit amount of that is also $2,000.

Recently, the $2,000 cap was removed for solar hot water heaters. Consumers who use solar hot water heating can claim the full thirty percent of the cost of the system as a tax credit. This unlimited amount also applies to solar panels systems as long as they comply with electrical and fire safety codes.

Qualified costs for this tax credit include the money you spent on the solar system and the hardware. Most residential solar kits include the equipment and the hardware you will need to build a complete system. For a DIY residential solar power system, the costs can be less if you know where you shop for your components. You will reap more of the benefit of this tax credit.

Each state also has its own set of tax credits and incentives for residents who invest in solar electricity projects. A database was set up to catalog these incentives for renewable energy sources. It is called DSIRE (Database for State Incentives for Renewables and Efficiency). Check it out at www.dsireusa.org.

Let’s take the state of California for instance. Sacramento has implemented a residential energy efficiency loan program to help district residents defer the costs of their home improvements that use renewable energy sources. If you own your own property, you can qualify for one of these loans with an interest rate of 8.5 percent.

It doesn’t hurt to look and see what your state and federal government is willing to do for you when it comes to saving the planet. Use tax incentives to turn your residential solar power system into an affordable proposition.