Federal Tax Credit for Massachusetts Solar

Use of solar power has exploded in Massachusetts and all across North America in the last several years. Whether you want to “go green”, get off the grid, or simply lower your energy bills, utilizing solar energy is a big step in the right direction.

Through the end of the year 2016, qualifying solar energy systems are eligible for a federal tax credit of up to 30 percent of the cost of the system (section 25D of the Internal Revenue Code). Unlike most efficiency upgrades, there is no upper limit on tax credits for certain solar energy systems. Combined with state incentive programs and manufacturer rebates, converting to solar has never been more appealing to Massachusetts residents.

The two solar energy systems eligible for the federal tax credit are:

Solar water heaters

Available in a diversity of sizes and designs, all models rely on thermal energy from the sun to at least partially heat your home’s water. Most also have a back-up heating method for those not-so-sunny days known to occur in Massachusetts. Qualifications for a solar water heater follow:

  • Must be installed and functional
  • Must comply with local safety and building codes
  • Units for use with swimming pools or hot tubs are not eligible
  • Cost of installation counts towards tax credits
  • A minimum of 50 percent of the water heater’s energy must come from the sun

Any Energy Star qualified solar water heater is eligible for the federal tax credit, a convenient way to narrow down your search without worrying about calculating what percent of its power comes from solar energy.

Solar panels

– Also called solar modules or photovoltaic systems, solar panels convert the sun’s energy into electricity and can be used to partially or wholly power your home. The requirements for solar panels to be eligible are even simpler:

  • Must be installed and functional
  • Must comply with local safety and building codes

Both systems share some qualifications:

  • May be installed in your principal or secondary residence, or both
  • May be installed in either new construction or an existing home
  • Home must be within the United States
  • Cooperative apartment buildings and condominiums are eligible
  • Rental properties are not eligible

Determining if the equipment itself qualifies for the federal tax credit is surprisingly easy–the manufacturer will provide a Manufacturer’s Certification Statement, either on their website or by contacting the company. You can view a sample here. As the name implies, the certification statement guarantees the product’s eligibility. You’ll want to acquire a copy of the certification for your records, though it is not required to be submitted when filing for your tax credit.

Along with the Manufacturer’s Certification Statement you’ll want to hang on to any sales and installation receipts, as you would any other tax-related records. To claim your federal tax credit you’ll need to fill out the IRS form 5695, Residential Energy Credits, when you file your 2011 taxes. The 2011 version of form 5695 is not available on the IRS website as of this writing, but you can view the 2010 version to get an idea of what information will be required.

A tax accountant can verify eligibility through every step of the process if you’re not comfortable doing so yourself. Ultimately you should be prepared, if needed, to demonstrate:

  • Total cost of the system (including labor)
  • Date the system was installed
  • System-specific requirements are met (discussed above)

Tax credits are also available for commercial properties, with requirements essentially the same, but corporate taxpayers must use the Investment Credit IRS Form 3468. Again the 2011 version is not available as of this writing but the 2010 version can be viewed here.

More information about federal tax credits, solar energy and other eligible upgrades can be found on the Energy Star website and the Department of Energy website.

Original Article on The Boston Solar Company

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