All About The Renewable Energy Federal Tax Incentives

In an effort to reduce energy usage across the country, the federal government has begun offering tax incentives for homeowners who purchase and put into use methods and means of creating and utilizing renewable energy.  The administration of President Barack Obama has expanded upon existing incentives and added new incentives in an effort to encourage home builders and existing homeowners to convert to renewable sources of energy rather than maintaining a dependence on fossil fuels.

Technologies that are eligible for the incentive include solar water heaters, photovoltaics, fuel cells, wind generators, geothermal heat pumps, and other technologies that employ the use of solar electricity.  Geothermal heat pumps are required to meet energy star certification requirements, while solar water heaters must be certified by the SRCC in the state in which they are installed.  Half of the energy or more used to heat the water within the home must be derived from solar sources.  It is also requires that fuel cells have an efficiency of electricity-only generation of thirty percent or more.

The standard allowance for renewable energy sources is thirty percent of the cost, though there is a cap on many of the incentives if they were installed before January 1, 2009.  Systems installed after this date have no maximum incentive.  The deduction caps on these systems vary and are as follows.  For solar-electric systems, solar water heaters, and geothermal heat pumps installed in 2008, the cap is set at two thousand dollars.  For wind turbines installed in 2008, the cap is set at four thousand dollars.  Fuel cells have an incentive cap of five hundred dollars per 0.5 kW.  It is also very important for homeowners and home builders to know that any excess credit gained from these incentives may be carried over into the succeeding tax year.

In order to claim these tax incentives, homeowners must file IRS Form 5695 with their Federal Income Tax Return or as part of an amended return.  This tax credit was initially established in 2005 as part of the Energy Policy Act, and was extended as part of the Energy Improvement and Extension Act of 2008.  In February 2009, the credits were enhanced and the bill extended until 2016 as part of the American Recovery and Reinvestment Act.

In all, there are a number of federal incentives to encourage the transition to renewable energy sources as well as to help offset the costs associated with doing so.  Homeowners should also look into the various grants available to consumers looking to build a home that utilizes renewable energy as a primary energy source.  Most states offer additional incentives from the use of these energy products, and homeowners are urged to look into both state and federal incentive programs any time they are considering the utilization of renewable energy sources.

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