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Solar cells and the IRS should be friends, because the government purports to be seeking alternative energy sources. The U.S. government should give tax credit to those who purchase solar panel systems. But does it?

The worth of solar panel systems in the IRS' eyes is found in the Energy Policy Act of 2005 for People. In 2006, in...

Solar panels seem to be a very good way to create cheaper electric power. They look a great way to heat water, in addition to the air inside homes.

Solar panel systems and the IRS should really be friends, because the government purports to be seeking alternative energy sources. The U.S. government should provide tax credit to those that invest in solar power panels. But does it?

The worth of solar panel systems in the IRS' eyes is shown in the Power Policy Act of 2005 for People. In 2006, inflation modification results received, but the act remains basically the same.

Energy Policy Act of 2005 for Individuals (EPACT) - Summary

Individuals will make energy-conscious purchases, and get tax benefits for doing so. What the law states provides tax credits to make your principal residence, which must be in the U.S., more energy efficient. Additionally, it offers tax credits for buying particular energy-efficient products, including alternative automobiles such as hybrids.

Solar power panels, says IRS, may earn tax credits when they are on your own primary home, and that home is in the U.S.

The majority of EPACT remains in effect for the duration of 2007. Many think it'll be restored or expanded in 2008.

Aspect Regarding Solar Cell Tax Breaks

The Energy Policy Act of 2005 makes a tax credit available to people who increase certified solar panels to their homes in the U.S. The IRS allows one credit corresponding to 30 percent of the qualified investment in a solar cell up to a maximum $2,000 credit. The IRS also allows an equal credit for investing in a solar water home heating. You might credit as high as $4,000, $2,000 for solar cells, and $2,000 for solar water heating.

Whether you put solar cells or a solar water home heating, you can not use any element of it to heat a hot spa or children's pool.

Solar power panels, for IRS tax credit qualification, must be put in support between January 1, 2008 and December 31, 2005.

State Discounts or Tax Incentives and the IRS

You might find that the solar panels meet the criteria for state concessions or tax incentives. Your states energy company website could have more details on that. If your state or utility does give incentives for installing solar panel systems, the IRS tax credit applies to the foundation remaining after state incentives have been taken by you.

Example: Your $10,000 solar panel array gets $5,000 in state tax incentives. It would then be eligible for a credit corresponding to 30 % of $5,000. Your Federal IRS tax credit could be $1,500.

To find any tax incentives your state may offer, just search on the state name with the words solar bonus, without quotation marks.

Wouldn't a Tax Deduction Be A lot better than a Tax Credit?

Normally talking, a tax reduction is less valuable for your requirements compared to same number of tax credit. A tax deduction eliminates a percentage of the tax the IRS is owed by you. But a credit reduces your tax, dollar-for-dollar.

Solar Power Panels absent GOVERNMENT Loans

Even when EPACT hadn't been signed into law, and the IRS offered number tax credits, cell installation could still be a wise investment. Many discover that a solar cell array pays for itself within three to four years. Money is then saved by them on energy for many years with little maintenance.

Therefore, while tax credits are pleasant, you may still might like to do more research in to the possible savings of solar panels.

Disclaimer: Please be aware that mcdougal isn't a tax professional and can not give you tax advice. The data above is for educational purposes only. this site