Residential Renewable Energy Tax Credit

Have you thought about adding a renewable energy solution to your home?  How would you like the government to help you with the costs?  Well if you have the system in place by December 31, 2016, you can take advantage of a Federal tax credit equal to 30% of qualified expenditures.  And a similar tax credit is offered by NC Department of Revenue through December 31, 2015 with an extension to 2016 for certain situations.

Federal Residential Renewable Energy Tax Credit

Since 2005 the Federal government has tried to make the transition to alternative energy more cost effective for the individual tax payer by offering tax credits.  The Federal government has extended the special tax credits, through December 31, 2016, for those willing to install an alternative energy source for their home.

You are allowed a tax credit, equal to 30% of qualified renewable energy expenses paid during the year, on your income tax return, with no maximum dollar amount limitation.  The system must serve a dwelling unit in the United States and be owned and used as a residence by the taxpayer, although, for most systems it does not need to be your primary residence to qualify.  Additionally, if the 30% credit for your system exceeds your tax liability to the IRS, you are allowed to carry forward any remaining credit balance to the next tax year, up through 2016.  After 2016 it is unclear as to whether or not the unused portion of the credit can be carried forward any further.

The Federal government has defined both qualified systems and expenditures as follows:

  • Qualified Systems: Solar electric, solar water heating, fuel cells, small wind energy, and geothermal heat pumps.
  • Qualified Expenses: Labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home.  All expenses for tax credit purposes are treated as made on the date that the installation is completed.

There are a couple extra requirements for the solar water heating, fuel cell, and geothermal systems to meet the qualifications for the tax credit.  Those are as follows:

  • Solar Water heating: The equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC), and at least half the energy used to heat the dwelling’s water must be from solar.  Solar water heating systems used for swimming pools and hot tubs are not eligible.
  • Fuel Cells: The 30% credit is subject to a maximum dollar amount of $500 per half Kilowatt, the fuel cell must have the nameplate capacity of .5 Kilowatt of electricity using an electrochemical process and an electricity-only generation efficiency of 30% or greater, in cases of joint occupancy the maximum credit allowed is $1,667 per .5 Kw while the maximum each individual can claim is proportional to the amount they paid (not applicable to married couples filing jointly), and finally the home must be the taxpayers primary residence.
  • Geothermal heat pumps: Must meet federal Energy Star criteria.

You can find more information on the Federal renewable energy tax credit at:  www.energystar.gov/taxcredits

NC Renewable Energy Tax Credit (Personal)

For residence of NC, similar credits are available, but with some varying criteria from federal standards.   A total credit of 35% of eligible costs (up to various maximum dollar amounts) is allowed for eligible systems constructed, purchased, or leased by a taxpayer and placed in service in N.C. during the taxable year (through 2015).

The credit taken for any given tax year may not be more than 50% of the taxpayers total state tax liability, reduced by the sum of all other state tax credits.  If the credit is not used entirely in the first year, the remaining amount may be carried forward for the next five years.

The NC credit was only available through 12/31/2015; however, NC Senate Bill 372 provides a delayed sunset of 12/31/2016 for projects that meet certain criteria:

  • For systems with a total size of 65 Megawatts or less, 80% of costs must be incurred, and 80% of the construction must be completed, before 12/31/2015.
  • For systems with a total size of 65 Megawatts or greater, 50% of costs must be incurred, and 50% of the construction must be completed, before 12/31/2015.

NC Qualified Expenses:  The cost of the equipment and any associated design, construction, and installation expenses.  Any discounts, rebates, referral credits, or similar reductions provided by public funds are not eligible for the credit.

NC Maximum dollar amounts and systems allowed under the 35% total credit:

  • $3,500 per dwelling unit for active solar space heating, combined active solar space and domestic water heating, and passive solar space heating for non-business purposes.
  • $1,400 per installation for solar water heating, including solar pool-heating systems, for non-business purposes.
  • $8,400 for geothermal heat pumps and geothermal equipment that uses geothermal energy for water heating or active space heating or cooling used for non-business purposes.
  • $10,500 per installation for photovoltaic systems (also known as PV or solar-electric systems), wind-energy systems, combined heat and power systems, or certain other renewable energy systems used for non-business purposes.

You can find out more about NC renewable energy tax credits, rebates, and savings at:  Energy.gov info for NC

So if you are thinking of implementing a renewable energy system, and you want to mitigate the costs and maximize your rate of return, then you need to act before the renewable energy tax credits expire!