With our attention riveted by the election and the economy this fall, it was easy to miss some good green news coming out of Washington, D.C. On October 3, President Bush signed into law the “Emergency Economic Stabilization Act of 2008.” Best known for authorizing the $700 billion bailout of Wall Street, this bill also extends federal tax credits that expired in 2007 for energy-efficient home improvements. In addition, it increases tax credits for solar energy systems and extends them for eight years.
Besides benefiting homeowners, this law will likely spur the growth of the domestic solar industry, leading to the creation of thousands of green collar jobs and helping reduce the nation’s carbon emissions.
If you’ve been putting off buying a photovoltaic (PV) system because of the cost, it’s time to take another look. The previous federal tax credit for residential solar electric systems was capped at $2,000. Now, for systems placed into service from January 1, 2009 to December 31, 2016, you can take a credit equal to 30% of the installed system cost, with no cap.
If, for example, you buy a PV system that costs $30,000 after state or local incentives, you can take a federal tax credit of $9,000. A $12,000 system will get you a credit of $3,600. Keep in mind that unlike a tax deduction, a credit is a dollar-for-dollar reduction of your income tax. If you can’t take the entire credit in the year the system is installed, you can carry it over to future years.
The new law also offers tax credits for insulation and energy-efficient windows, heating and cooling equipment, and non-solar water heaters. There’s a 30% credit for solar water heaters (capped at $2,000), and credits for small wind energy systems and fuel cells. The Energy Star website has a helpful table that summarizes the federal credits. For a state-by-state listing of local and state incentives for solar energy systems and energy efficiency improvements, visit www.dsireusa.org.