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Updated February 15, 2014

Federal Tax Credit and Incentives:

As part of its effort to encourage the use and utilization of renewable energy, the federal government provides taxpayers with tax incentives to purchase solar, wind and energy-efficient technologies for residential, commercial and corporate applications.

On this page we summarize a few of the more common federal incentives and provide a link at the bottom of this to a database for a complete listing of federal incentives, policies and programs.

Federal Residential Renewable Energy Tax Credit

The Residential Renewable Energy Tax Credit is a Federal personal tax credit. The tax credit amount is 30 percent and went into effect on January 1, 2006. This tax credit is scheduled to sunset on Dec. 31, 2016. The renewable technologies eligible are Photovoltaics, Solar Water Heating, other Solar Electric Technologies, Wind, Fuel Cells, Geothermal and Heat Pumps.

federal-tax-incentivesThe maximum incentive varies by technology and according to when the system was placed in service:
  • Solar-electric systems placed in service after 2008: no maximum
  • Solar water heaters placed in service after 2008: no maximum
  • Wind turbines placed in service after 2008: no maximum
  • Geothermal heat pumps placed in service after 2008: no maximum
  • Fuel cells: $500 per 0.5 kW

For more information see: US Code 26 – Internal Revenue Service

Tax Form: IRS Form 5695 & Instructions: Residential Energy Credits

Federal Residential Energy Conservation Subsidy Exclusion (Personal)

This incentive is a Federal Income Tax personal exemption. The key element is that energy conservation subsidies provided to customers by public utilities, either directly or indirectly are non-taxable. Photovoltaics, Solar Water Heat, and Solar Space Heat, are eligible technologies as well as unspecified energy efficiency technologies. It applies to residential and multi-family residential properties. One hundred percent of the subsidy is exempt. There are specific rules and provisions and the customer should consult a tax professional.

For details and more information visit: www.irs.gov/publications/p525/index.html

Federal Energy-Efficient Mortgages (EEMS)

This incentive is in the form of a Federal Loan Program. Photovoltaics, Solar Water Heat, Solar Space Heat, Passive Solar Space Heat, and Daylighting as well unspecified Energy Efficiency technologies are eligible.

Homeowners can either finance energy efficiency improvements to existing homes, including renewable energy technologies, or to increase their home buying power with the purchase of a new energy efficient home when taking advantage of EEMs. The U.S. federal government supports these loans by insuring them through Federal Housing Authority (FHA) or Veterans Affairs (VA) programs. This allows borrowers who might otherwise be denied loans the ability to pursue energy efficiency implementation, and it secures lenders against loan default. Fannie Mae and Freddie Mac also have EEM programs.

For details and more information visit: www.resnet.us/ratings/mortgages

For a complete listing of all federal incentives and policies for renewable and energy efficiency, see the Database of State Incentives for Renewable and Energy Efficiency.

As with the other incentives summarized by the Arizona Solar Center, the customer should consult with authorities such as their utilities, qualified contractors, and accountant.

For details and more information contact:
   Public Information - IRS
   U.S. Internal Revenue Service
   1111 Constitution Avenue, N.W.
   Washington, DC 20224
   Phone: (800) 829-1040
   Web Site: www.irs.gov

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