Energy Tax Credit: 2015 Edition

solar panels on house

In an effort to do their part to encourage citizens to live greener, more energy efficient lives, state and federal governments have taken to offering tax credits to homeowners who invest in greater energy efficiencies.

These tax credits can add up to substantial savings for homeowners, while taking a bit of the bite out of initial investments in green energy systems. We’ll give you the nitty gritty details of the 2015 tax credits that are available so you can keep them in mind as you make home improvement plans throughout the year.

Residential Renewable Energy Tax Credit

The federal government is offering citizens a 30 percent tax credit on investments they make in energy efficient systems for homes. Whether it’s a new home construction or you’re remodeling an existing home, your home is likely to qualify.

Even secondary residences qualify for this particular tax credit and there is no upper limit. Rental homes, unfortunately, are not eligible. The tax credit is currently set to expire on December 31, 2016.

The following are the systems that are currently eligible for the tax credit.

Geothermal Heat Pumps

These pumps, located beneath the ground, use the heat of the earth in order to power them to heat and cool your home and to deliver hot water in many homes. Because they use the natural heat from the earth, they aren’t relying on fossil fuels and natural gases, making them one of the most efficient of all technologies available today for heating and cooling homes.

Small Wind Turbines

Wind turbines collect kinetic energy from wind, converting it into electricity for use in the home’s electrical system. In order to take advantage of this tax credit, which does cover installation costs, the home must have a maximum nameplate capacity of 100 kilowatts.

Solar Panels

These panels use light energy, produced by the sun, and convert it into electricity. In order to qualify for the tax credit, the system must provide electricity for the home while also meeting local standards and code requirements for fires and electrical systems.

Solar Water Heating

There are many designs available for solar water heating. Unfortunately, not all of them are eligible for tax credits. Tax credits are only available for solar water heating used inside the home and not for solar heating of swimming pools or hot tubs.

Additionally, solar water heating systems must be certified by the SRCC (Solar Rating and Certification Corporation) or similar agency endorsed by U.S. or state government where the system is installed, and must generate at least half of its energy from the sun. Fire and electrical code requirements for city and state must also be met before tax credits are available.

Fuel Cells

The federal tax credit for fuel cells differs slightly from other federal tax credits offered in that it does have a cap of up to $500 per .5 KW of power capacity. Further differences are the tax credits for fuel cells are only available on primary residences and not on secondary homes.

Rentals also do not qualify for this tax credit, though you can get the credit whether you’re building a new structure or improving an existing structure.

Tax credits for fuel cells do include installation costs and the cells must have a minimum of 30 percent efficiency with a minimum capacity of 0.5 KW to qualify as well. To claim these residential energy tax credits, you’ll need to fill out IRS Form 5695 and attach it to Form 1040 or Form 1040NR. It’s always wise to work with an accountant on matters like this.

State and Local Tax Credits for Energy Efficiency

The federal government isn’t the only one offering incentives to homeowners, renters, and other consumers to cut the cord and stop relying so much on electricity and gas for energy in favor of more sustainable or renewable energy sources.

The U.S. Department of Energy, in conjunction with the North Carolina Clean Energy Technology Center, has created a database of state and local tax incentives that are available for various greener living decisions that make your home more energy efficient.

You can learn more by visiting DSIREUSA.org. This site offers much more than tax credits you might find useful or interesting. It also offers a wide range of useful tools and information about the following:

  • Tax deductions
  • Federal Grants
  • Federal Loans
  • Personal Exemptions

State programs vary according to state and local governments and regional energy interests. You might find that states with greater demand offer more aggressive incentives than those that have fewer strains on existing energy infrastructures.

Utility Companies Doing Their Part Too

Utility companies also understand the importance of every citizen doing his or her part to conserve resources and save the planet. While their jobs are to manage energy, many of these organizations are investing heavily in alternative energies as a way of conserving limited resources and creating less pollution.

This means that they are willing to reward your efforts to live more energy efficient lives in the form of rebate offers. For instance, in Indiana, Carroll County, REMC offers a Residential Energy Efficiency Rebate Program that offers various rebates to consumers, including the following:

  • $300 rebate for an air source heat pump
  • $500 per ton rebate for a geothermal heat pump
  • $150 for contractor installation
  • $35 for refrigerator recycling

You can find many of these rebates and information about many others on the DSIREUSA.org website as well.

Take Advantage of the 2015 Energy Tax Credits

While perhaps not as meaty as previous tax credits offered by Federal and State governments, the current list of tax credits add up to substantial savings for those savvy enough to take advantage of them. Since they are currently set to expire at the end of 2016, the time to plan your energy efficient utility changes is now.

Get all the facts about the federal tax credit program before you make the changes in order to insure compliance and consider their impact on your overall tax picture for the year. While there’s never a bad time to make positive energy efficient changes to your home, there may never again be a better time than right now.

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