The residential renewable energy tax credit is helping people all across the United States go solar.
This is a 30% investment tax credit for residential solar energy systems. This can save you money on tax bills and can reduce the payback period of your solar panels significantly.
This tax credit can save homeowners and renters hundreds of dollars per year while significantly reducing their carbon footprint.
But how can you qualify for it? Read on to find out!
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Installation of a Qualified Renewable Energy System
Qualifying for the residential renewable energy tax credit is relatively straightforward. Provided you’ve installed a qualified renewable energy system. The system must be operational at your principal house in the United States.
In addition, the system must serve either a residential dwelling (i.e. single family home) or an apartment complex of up to four stories with not more than four residential units.
Solar electric and solar water heating systems are the only types of systems that are eligible for tax credits. Some added equipment may also qualify for the tax credit if it’s used as a part of the solar electric system.
An installation will typically take at least several days, depending on the complexity of the system and the necessary components. If you’ve met all of the requirements and the system is installed and operational, use IRS Form 5695 to claim the tax credit.
The System Must Be New
To qualify for the residential renewable energy tax credit, the system or device must be “new.” This means that it was acquired and/or placed in service as an addition to the existing structure after January 1, 2006. Used systems and devices are not eligible for tax credits even in good working order.
The residential renewable energy tax credit applies to a variety of energy technologies that include:
Homeowners must install their solar power system on or after January 1, 2006, and place it in service before December 31, 2019. The system must also be used to generate electricity at the taxpayer’s primary residence.
Hot Water Systems
To qualify for the residential renewable energy tax credit, a hot water system must meet certain criteria. The system must be installed in a residential building.
The solar energy used to heat the water must be generated on the property where the system is installed.
Geothermal Heat Pumps
A homeowner needs to install a geothermal heat pump that meets the guidelines. It must be used to improve the taxpayer’s home that they use as their primary house.
To qualify for the residential renewable energy tax credit for wind turbine installations, you must obtain Form 5695 from the IRS and have it filled out in full by a certified professional.
In addition, you need to have a licensed electrician perform the turbine installation, have the turbine certified and inspected to confirm it meets relevant safety standards and maintain records of all paperwork associated with the purchase and installation of the turbine.
Homeowners should be aware that fuel cells are included in the list of qualified technologies. The credit encompasses 30% for residential solar and fuel cells, up to a $500 dollar limit for fuel cells and joint heat and power systems.
To qualify for credit, the fuel cell must have an electricity-only generation efficiency of 30 percent, must have a capacity of 0.5 kilowatts, and must be certified by the manufacturer as meeting applicable air quality standards.
Solar electric systems must be certified for safety by the Solar Rating and Certification Corporation or the Small Wind Certification Council in order to be eligible for the tax credit. Additionally, suitable systems must be for residential use.
Owned, Not Leased
In order to qualify for the residential renewable energy tax credit, you must own the renewable energy source—not lease it. You will have to provide proof of ownership to be eligible for the tax credits. You must have the system or product in service prior to December 31st of the year in order to qualify; certain products may have different deadlines or restrictions.
When you have a system or product installed, you must also make sure you have obtained all relevant permits as well. The residential renewable energy tax credit can be a great way to help homeowners offset their renewable energy costs.
You can also click this link to start going solar and qualify for residential renewable energy tax credits in no time!
Tips for Maximizing the Benefits of the Credit
To qualify for the full amount of the credit, you should maximize energy production and improve energy efficiency in the home. Here are some tips for maximizing the benefits of the residential renewable energy tax credit:
Install a Larger System
The tax credit is based on a percentage of the total cost of the renewable energy system. Therefore, installing a larger system will result in a larger credit. However, it’s important to keep in mind that the system must meet the homeowner’s energy needs and be properly sized for their home.
Time of the Installation
Homeowners should consider the timing of the installation of their renewable energy system in order to maximize the tax credit. For example, if they know they will have a higher tax liability in the coming year, they may want to delay the installation until that year to claim a larger credit.
Keep Track of Expenses
Homeowners should keep detailed records of all expenses related to the installation of their renewable energy system, including receipts, invoices, and contracts. These records will be necessary when claiming the tax incentives for renewable energy.
Claim Your Credit Early
Homeowners should claim the tax credit as soon as possible rather than waiting until the tax deadline. This will allow them to receive credit sooner and potentially use the funds for other energy-saving home improvements.
Consult With a Tax Professional
The tax code can be complex, and it’s important to ensure that homeowners are taking full advantage of all available tax credits and deductions.
Therefore, it’s a good idea to consult with a tax professional who can provide guidance on how to maximize its benefits.
Learn More About the Residential Renewable Energy Tax Credit
The residential renewable energy tax credit provides an excellent incentive. Go ahead and take advantage of the incentives and make sure you meet the qualifications.
Don’t miss the opportunity to enjoy the renewable energy tax credit – start planning your renewable energy switch today.
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