Flexible Loans for Solar Hot Water Heaters

Federal Tax Credits for Solar, Wind, & Energy Efficiency

The Energy Policy Act of 2005 (EPAct 2005) established tax incentives for a number of renewable energy and energy efficiency measures. Subsequent legislation has extended and modified these incentives, which include: 

• Tax credits for residential and commercial solar photovoltaic and solar hot water heating systems
• Tax credits for small wind and geothermal systems
• Tax deductions for highly efficient commercial buildings
• Tax credits for highly-efficient new homes
• Tax credits for improvements to existing homes including high-efficiency air conditioners and equipment
• Tax credits for residential fuel cell systems
• Tax credits for fuel cell and microturbines used in a business
• Tax credits for fuel-efficient vehicles

What are Tax Credits and Tax Deductions?
There is an important difference between a tax deduction and a tax credit. A tax deduction is subtracted from income before total tax liability is computed. On the other hand, a tax credit is subtracted directly from the total tax liability. This means that a deduction and a credit have very different values, with a credit being 3 or more times more advantageous to the taxpayer than a deduction. For example, a tax credit of $1,000 for someone in the 28% tax bracket is equivalent to a tax deduction of $3,571.

Tax Credits for Solar Photovoltaics and Solar Water Heating Systems

The Federal tax credits for solar photovoltaic and solar water heating systems are 30% of the installed cost of the system, with no maximum limit on the tax credit. They are available for residential and commercial solar energy systems placed in service through December 31, 2016.

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To be eligible for the solar hot water system tax credit, the system must be certified by the Solar Rating and Certification Corporation (SRCC) and produce 50% or more of the hot water needed by the residence. There is no qualification provided for PV systems. Individuals may claim tax credits for either or both types of solar systems.

Energy Efficiency Improvements for Existing Homes and Fuel-Efficient Passenger and Commercial Vehicles

To learn about the various other incentives available, visit the following websites.

Kentucky State Tax Credits for Renewables and Efficiency

Kentucky State Tax Credits for solar, wind, and energy efficiency are now available to residential and commercial taxpayers. Tax credits are available for equipment installed between January 1, 2009 and December 31, 2015.

Personal solar & wind tax credits are capped at $500 per taxpayer. Geothermal is capped at $250.

Commercial solar and wind tax credits are capped at $1,000 per taxpayer. Geothermal is capped  at $250. (The exception is that for single residential rental units, the cap for solar and wind tax credits is $500). 

Eligible Equipment and Specifications

Solar Photovoltaics - Tax Credit = $3 per watt direct current, capped at $500 for residential taxpayers and $1,000 for commercial taxpayers. Must be installed by NABCEP certified installer, meet requirements of Article 690 of the National Electric Code, and use UL-listed solar photovoltaic panels and inverters.

Solar Water Heating, Solar Space Heating, Passive Solar Space Heating, & Combination Active Solar Space Heating/ Water Heating Systems -  Tax Credit = 30% of installed cost, capped at $500 for residential taxpayers and $1,000 for commercial taxpayers. Solar water heating and active solar space heating systems must be installed by a NABCEP certified installer and must use solar thermal collectors certified by the SRCC under OG-100.  

Wind - Tax credit = 30% of installed cost, capped at $500 for residential taxpayers and $1,000 for commercial taxpayers.

Geothermal Heat Pumps - Tax Credit = 30% of installed cost, capped at $250 for residential taxpayers and $1,000 for commercial taxpayers. Closed loop geothermal heat pumps must have EER of 14.1 and COP of 3.6. Open loop geothermal heat pumps must have EER of 16.2 and COP of 3.5. DX geothermal heat pumps must have EER of 15 and COP of 3.5.

Caps apply for all technologies combined within a category, e.g. a residential taxpayer installing both a PV and a solar hot water system is limited to a $500 credit total. If seeking tax credits for efficiency and renewable energy measures, consult the statute or a qualified tax advisor to determine the applicable cap.

Energy Efficiency Tax Credits (Personal) - Eligible equipment includes qualifying water heaters, lighting, heat pumps, air conditioners, insulation, windows, and doors. Tax credit = 30% of installed cost. Maximum incentive for insulation = $100. Maximum incentive for other energy efficient equipment = $250 per item.

Energy Efficiency Tax Credits (Corporate) - Eligible equipment includes qualifying water heaters, lighting, lighting controls/sensors, boilers, heat pumps, air conditioners.  Tax credit = 30% of installed cost. Maximum incentive for lighting and HVAC equipment = $500

New Energy Star Homes - Tax credits available to the builder of a new home for the year completed or the seller of a manufactured home for year of sale, if used as a principal residence. For site built home, tax credit is $800. For manufactured home, tax credit is $400. Homes must meet Energy Star standards.

For all measures except for the Energy Star homes tax credits, the tax credit may be carried forward for one year.

To learn more  about specifications for qualifying equipment and other information:

Other Financial Incentives for Renewable Energy Systems

MACED Loans for Commercial Renewable Energy Investments and Business Development

MACED also offers loans to businesses for the installation of renewable energy systems, including solar photovoltaics, and to support the development of renewable energy businesses. Contact MACED for more information (433 Chestnut St., Berea, KY 40403,