Tax Credits for Solar Energy

Homeowners or businesses that install qualifying solar energy systems are eligible for a federal tax credit that can  mean substantial savings on their tax bills. Recent federal  legislation removed the cap on the credit amount that was  previously applied to photovoltaic (PV) and solar water  heating systems.  Businesses are also eligible for renewable energy grants  from the U.S. Treasury Department equal to 30 percent of  the solar system cost. The grant applies to systems placed  in service before January 1, 2016, provided construction  was started in 2009 or 2010. Businesses may choose either  the tax credit or the grant. Residential consumers are not  eligible for the grant, but are still eligible for the tax credit. 

What types of solar systems are eligible? 
Qualifying systems may be installed in a home or business.  They may be photovoltaic systems that produce electricity  or solar water heating units. Businesses can also get a tax  credit or grant for lighting systems that use solar energy to  illuminate the inside of a building with fiber-optic-distributed  sunlight. These credits are available for systems placed in  service between January 1, 2006, and December 31, 2016.

What is the amount of the tax credit?
The tax credit is for 30 percent of the cost of the system.  The advantage of a tax credit is that it is subtracted from  your total tax liability, as opposed to a tax deduction, which  only reduces the amount of your income before the tax is  computed.* There is no cap on the credit amount for solar  PV or solar water heating systems placed in service after  December 31, 2008.