RESIDENTIAL SOLAR ENERGY TAX CREDITS – Federal Incentives

The bill extended the 30% investment tax credit for solar energy systems through December 31, 2016 and removed the $2,000 residential cap that had been in place for 2007 and 2008. The tax credit applies to property which uses solar energy to generate electricity for use in a dwelling located in the United States and used as a residence by the taxpayer. The credit is taken in the year in which the solar equipment is “placed in service”.

So how does this work for you, our customers? Let’s say you have a solar energy system installed in your home at a cost of $25,000. Your tax credit would be $7,500 applied “dollar for dollar” against tax liability. Any unused credit can be carried forward to the next year.

A tax credit should not be confused with a tax deduction, which is much less valuable. A tax credit offsets tax due “dollar for dollar”. The tax credit is claimed on IRS Form 5695 “Residential Energy Efficient Property Credit” which attaches directly to IRS Form 1040. This form is available from the IRS website at www.irs.gov.

RESIDENTIAL SOLAR ENERGY TAX CREDITS – State Incentives

In July, 2007, the state of Louisiana enacted LAC 61:1:1907 which provides for a refundable tax credit for Solar and Wind Energy Systems on Residential Property.

Louisiana provides for a tax credit for the purchase and installation of solar and wind energy systems purchased and installed on or after January 1, 2008. The amount of the credit is equal to 50% of the first $25,000 of the cost of each system, including installation costs, or $12,500 maximum credit.

The Louisiana solar tax credit is a refundable credit. What does this mean to you, our customer? If you have a $25,000 system installed in your home you would received a credit of $12,500 which would be applied “dollar for dollar” against your tax liability with any unused portion refunded to you. The Louisiana Department of Revenue says the refund for any remaining credit would be issued within one year of receiving the claim.

The Louisiana solar tax credit is claimed on Schedule F of your personal income tax return, under “Additional Refundable Credits” as “Wind and Solar Energy Systems – credit Code 64F”.

COMMERICAL SOLAR ENERGY TAX CREDITS

The Federal Investment Tax Credit for Commercial and Business owned systems is 30% of net system cost with no cap. The IRS current federal Form 3468 is available at www.irs.gov/formspubs.

U. S. Department of Treasury – Renewable Energy Grants

The American Recovery and Reinvestment Act of 2009 enacted in February 2009, created a renewable energy grant program that will be administered by the U.S. Department of Treasury. This cash grant may be taken in lieu of the federal business energy investment tax credit (ITC). In July 2009 the Department of Treasury issued documents detailing guidelines for the grants, terms and conditions and a sample application. There is an online application process, and applications are currently being accepted. See www.treas.gov/recovery/1603.shtml for more information. Grant applications must be submitted by October 1, 2011 on eligible systems placed in service in 2009 or 2010. The U.S. Treasury Department states it will make payment of the grant within 60 days of the grant application date or the date the property is placed in service, whichever is later.
 
Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation (2008-2009)

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. Solar Energy Systems may be depreciated over five years. During 2009 business entities may be eligible for 50% bonus depreciation for systems acquired and placed in service in 2009.

Before calculating depreciation for such a project, including any bonus depreciation, the adjusted basis of the project must be reduced by one-half of the amount of the energy credit for which the project qualifies. For more information on the federal MACRS, see IRS Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562 please visit www.irs.gov/formspubs.