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As we sit in the middle of winter, most people can't believe how
high their utility bills are. Going with solar energy can lower
your bills and you get a hefty tax credit
Solar Tax Credit
Solar energy is a clean, renewable energy source. The production
of solar energy on residential and commercial structures creates
no pollutants and is starting to make serious financial sense.
In 35 states, the concept of net metering is now an established
fact. Net metering simply means you can sell energy from solar
panel systems back to utilities, thus eliminating or seriously
reducing utility bills. As oil and natural gas costs skyrocket,
the Federal Government is doing even more to promote the use of
solar energy.
In 2005, Congress enacted the Energy Policy Act. As part of the
act, a tax credit was established for any person purchasing and
installing residential solar energy systems for electric and
water heating purposes. If you purchase and install solar
systems for either of these purposes, you can take a 30 percent
tax credit. If you install systems for both of these purposes
you can double the tax credit. To avoid tax abuse, each tax
credit has a cap of $2,000.
Importantly, tax credits are far more valuable than tax
deductions. Tax deductions are taken from your gross income
prior to figuring the amount of tax owed. Tax credits are a
dollar for dollar reduction of the actual amount of tax you owe.
For instance, if you prepare your tax returns and find you owe
$5,000 to the IRS, a tax credit would be deducted from this
$5,000 figure. In short, a tax credit gives you a lot more bang
for your buck.
To claim the solar tax credit, there are a few restrictions and
requirements. First, you can't claim the tax credit if you use
the solar system to heat a hot tub or pool. Second, the system
must be certified by a solar rating certification corporation to
establish that you, in fact, installed a working system. Third,
the system must be activated between January 1, 2005 and the end
of 2007. Finally, you cannot claim the credit if the government
gave you a grant or financing to purchase the system, to wit, no
double dipping.
When solar energy is discussed as a potential alternative energy
source, most supporters point to the environmental benefits.
Ultimately, the benefits to ones bank account will really make
the difference and the solar tax credit is a solid step in that
direction.
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