Renewable Energy Tax Credits

Under the Consolidated Appropriations Act of 2021, the renewable energy tax credits for fuel cells, small wind turbines, and geothermal heat pumps now feature a gradual step down in the credit value, the same as those for solar energy systems. 

Tax Credit: 

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2023
  • 22% for systems placed in service after 12/31/2022 and before 01/01/2024

Expires:  December 31, 2023

Details:  Existing homes and new construction qualify.  Both principal residences and second homes qualify. Rentals do not qualify. 

Geothermal Heat Pumps

altGeothermal heat pumps are similar to ordinary heat pumps, but use the ground instead of outside air to provide heating, air conditioning and, in most cases, hot water. Because they use the earth's natural heat, they are among the most efficient and comfortable heating and cooling technologies currently available.

Requirements

Must meet the requirements of the ENERGY STAR program which are in effect at the time of the expenditure. Tax credits includes installation costs.

The home served by the system does not have to be the taxpayer's principal residence.

     Water-to-Air      Water-to-Water      Direct Expansion
   Closed Loop:    Closed Loop: EER >= 16
       EER >= 17.1        EER >= 16.1 COP >= 3.6
       COP >= 3.6        COP >= 3.1
   Open Loop:    Open Loop:
       EER >= 21.1        EER >= 20.1
       COP >= 4.1        COP >= 3.5

Definitions: 

  • COP (Coefficient Of Performance) - of a heat pump is the ratio of the change in heat at the "output" (the water reservoir of interest) to the supplied work.
  • EER (Energy Efficient Ratio) - The higher the EER rating, the more energy efficient the equipment is. This can result in lower energy costs. This DOE site can show how to calculate potential energy costs savings of a more efficient unit.

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Small Wind Turbines (Residential)

altA wind turbine collets kinetic energy from the wind and converts it to electricity that is compatible with a home's electrical system.

Requirements
Must generate no more than 100 kilowatts of electricity for residential use. 

Tax credits includes installation costs.

The home served by this system does not have to be the taxpayer's principal residence.

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Solar Energy Systems
Solar Heater

Solar Water Heaters

Solar water heaters come in a wide variety of designs, all including a collector and storage tank, and all using the sun's thermal energy to heat water.  Solar water heaters are typically described according to the type of collector and the circulation system.

Requirements

At least half of the energy generated by the "qualifying property" must come from the sun.  The system must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.

Note:  The credit is not available for expenses for swimming pools or hot tubs.  The water must be used in the dwelling.

Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements.

Tax Credit includes installation costs.

The home served by the system does not have to be the taxpayer's principal residence.

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solar panelSolar Panels (Photovoltaic Systems)

Solar Panels or Photovoltaic Systems are solar cells that capture light energy from the sun and convert it directly into electricity.

Requirements

Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements.

The home served by the system does not have to be the taxpayer's principal residence.

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Fuel Cells (Residential Fuel Cell and Microturbine System)

altFuel cells are important enabling technology for the hydrogen economy and have the potential to revolutionize the way we power our nation, offering cleaner, more-efficient alternatives to the combustion of gasoline and other fossil fuels.

Requirements

Tax Credit includes installation costs.

The maximum credit is $500 per half kilowatt (kW) of power capacity.

The fuel cell  must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.

The home served by the system MUST be the taxpayer's principal residence.

In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he/she paid.

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