Federal Energy Tax Credit

Although they sound similar, there is a significant difference between a credit and a deduction. When a deduction is used, the amount is subtracted from income before computing tax liability. A credit, however, is subtracted directly from the total tax owed. Therefore, a credit winds up extending a three (or more) times greater effect. Do some research before signing contracts for products, and check the online Database of State Incentives for Renewables and Efficiency for information on state, local, federal and even utility company incentives.

Congress has routinely extended deadlines for federal energy tax credit. An individual can take both a credit (up to a specified cap) for about a third of the cost of installing photovoltaic (solar electric panel) systems and another one (up to an additional cap) for about a third of the cost of a solar water heating system. (Unfortunately for owners of pools and hot tubs, the solar tax credit does not apply to these items.) Another credit is available for fuel cells. Equipment must be certified by the Solar Rating Certification Corporation (SRCC) or another entity which a state government chooses.

A pitfall to avoid is the fact that many dealers who advertise themselves as 'solar dealers' are not only without connection to the Solar Rating Certification Corporation, but also may not even be licensed contractors! The systems they sell may not be SRCC approved. If a person takes an exemption from installing a non-approved system, he or she will be liable for any tax penalties incurred. Be sure that the installer is a licensed solar contractor, installing a properly approved system. There are websites which can recommend a list of solar contractors and products in areas throughout the United States.

The solar tax credit is figured out based on an individual's expenses for equipment (including labor). However, this does not include any expenses which have been subsidized by other programs. Fill out IRS Form 5695 to apply for this program. Various forms of federal energy tax credit programs have run their course and some have been extended. Groups are urging an eight year extension to current programs, in order to give the industry some sense of stability as members consider future investments. However, there is no guarantee that an extension will happen, so one is left wondering whether it is best to rush to complete renewable energy projects before the deadline, or wait and hope that a lengthy extension is granted, the industry continues to grow, and costs for renewable systems continue to decrease.

Current programs or exemptions have had significant results. Wind and solar-powered industries received much-needed assistance during periods when several consecutive years of federal energy tax credit had been extended. One year, nearly one third of all United States power capacity was added in the wind sector. Another year, this sector increased by nearly half. Solar tax credit also helped enable the solar sector to grow significantly. Plans for more large solar power projects are in development. These will either be shored up or stunted by future plans for extension or removal of credits. Advocates for extension of federal credits point to the additional jobs created by these facilities as further evidence that they are an appropriate economic bonus as well. The decisions which need to be made by government officials are complicated and may have long-term, widespread effects. This may especially be true in areas of fuels and energy use, which have an impact upon food supplies, natural resources and relationships between nations. No wonder Paul urges Timothy and other believers that "...supplications, prayers, intercessions and giving of thanks, be made for all men; For kings, and for all that are in authority; that we may lead a quiet and peaceable life in all godliness and honesty..." (I Timothy 2:1-2). Christians can pray that leaders will be guided to make decisions which are beneficial to all members of an increasingly inter-related world.

In the meantime, green buildings credits and efficient appliances credits remain the most commonly employed forms of assistance. No doubt there are many people who would be quite interested in investing in renewable energy systems for their personal or business use, but the up-front costs make it impossible to do so at this time. For this reason, further federal energy tax credit or solar tax credit may be the answer for this problem. It would also be helpful to advertise the existence of incentives and programs which offer assistance in procuring these renewable systems. Actually, most people are probably unfamiliar with the various products which are available for purchase by the public. Although there are doubtless many websites devoted to such items, perhaps a more widespread campaign utilizing television programs or commercials would be helpful in order to bring this information into public awareness. Such projects add long-term value to a home or business, while lowering costs and providing additional clean energy. Those are three incentives which will remain constant regardless of government policies.

Source: http://www.christianet.com/accounting/federalenergytaxcredit.htm

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