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Tax Credits for Residential Solar Energy Equipment and Electric Vehicles

Posted by Admin Posted on Oct 25 2017

Some "green energy" tax breaks for individual taxpayers expired at the end of 2016, while others are still on the table for 2017 and beyond.


Residential Solar Energy Credit


You can still claim a federal incomes tax credit equal to 30% of expenditures to buy and install qualifying energy-saving solar equipment for your home.  Since this gear is expensive, it can generate big credits.  There are no income limits.  The 30% credit is available through 2019.  In 2020, the credit rate drops to 26% and then to 22% in 2021.  After that, the credit is scheduled to expire.  The credit can be used to reduce your regular federal income tax bill and any Alternative Minimum Tax (AMT) bill.


Qualified Expenditures.  The credit equals 30% of qualified expenditures (including costs for site preparation, assembly, installation, piping, and wiring) for the following:


  • Qualified solar electricity generating equipment for your U.S. residence, including vacation home.

  • Qualified solar water heating equipment for your U.S. residence, including your vacation home.  To qualify for the credit, at least half of the energy used to heat water for the property must be generated by the solar water heating equipment.  You cannot claim the credit for equipment used to heat a swimming pool or hot tub.


State and Local Incentives May Be Available.  You might also be eligible for state and local tax benefits, subsidized state and local financing deals, and utility company rebates.


Expanded 30% Credit Opportunities for 2016 Installations


For 2017 and beyond, the 30% credit is limited to expenditures for qualified solar electricity generating equipment and solar water heating equipment.  For 2016 instillations, you can claim a 30% credit for the following expenditures:


  • Qualified wind energy equipment for U.S. residence, including a vacation home.

  • Qualified geothermal heat pump equipment for a U.S. residence, including a vacation home.

  • Qualified fuel cell electricity generating equipment for a U.S. principal residence.  The maximum credit is limited to $500 for each half kilowatt of fuel cell capacity.


   $500 Credit for More Modest 2016 Installations


A much more modest residential energy credit also expired at the end of 2016.  It had a lifetime maximum of $500 and covered qualified expenditures for advanced main air circulating fans; natural gas, propane, and oil furnaces and hot water boilers; electric heat pumps; electric heat pump water heaters; biomass fuel stoves; high-efficiency central air conditioners; natural gas, propane, and oil water heaters; energy-efficient windows, skylights, and doors; energy-efficient roofing products; and energy-efficient insulation.


Credit for New Plug-in Electric Vehicles


Another “green energy” break that is still on the books for 2017 and beyond is the federal income tax credit for qualifying new (not used) plug-in vehicles.  The credit can be worth up to $7,500.


Eligibility Rules.  To be eligible for the credit, a vehicle must draw propulsion from a battery with at least four kilowatt hours of capacity; use an external source of energy to recharge battery (thus the term plug-in); be used primarily on public streets, roads, and highways; have four wheels; meet applicable federal emission and clean air standards; and be used primarily in the U.S.  It can be either fully electric or a plug-in electric/gasoline hybrid.  Finally, the vehicle must be new and be purchased rather than leased.  If you lease an eligible vehicle, the credit belongs to the manufacturer, which may be factored into a lower lease payment.


The credit equals $2,500 for a vehicle powered by a four kilowatt-hour battery, with an additional $417 for each kilowatt hour of battery capacity beyond four hours.  The maximum credit is $7,500.  Buyers of qualifying vehicles can rely on the manufacturer’s or distributor’s certification of the allowable credit amount.  The credit can be used to offset your regular federal income tax liability and any AMT that you owe.  There are no income restrictions.


State Incentives May be Available.  You may be eligible for state income tax credits, rebates, or reduced vehicle taxes and registration fees for buying or leasing qualifying electric vehicles.


Depending on your situation, these “green-energy” credits could be lucrative.  Contact us if you have questions or want more information.