US tax advantages of Solar panels (both water and electric)

Here’s another ‘sunny’ incentive to go green: Using solar panels and other solar powered equipment can help you avail of a tax credit of up to 30% of the cost, with no upper limit. The tax credit is available for both – solar water heating systems and for photovoltaic cells that produce electricity. Solar water heating system must create at least 50% of its energy from the sun and must be for use in a residential property. Tax credit cannot be claimed if you’re looking at heating up your swimming pool, Jacuzzi or hot tub, only for simple every day usage within the house. It is important, that your system be certified by the Solar Rating and Certification Corporation or the Energy Star.

With photovoltaic cells, you can avail of similar 30% of cost tax credit for residential electricity needs. It is also important that the panels meet the necessary fire and electrical code requirements.

The tax credit is available only for systems ‘placed in service’ before the 31^st of December, 2016. To avail of the tax credit, you will need to file the IRS Form 5695 for the year during which you’re claiming tax credit. Along with this, you will also need a statement of certification from the manufacturer, certifying that his products meet the qualifying criteria for the tax credit.  

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