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Tax Credit For Going Solar
By: Rick Chappo
As we sit in the middle of winter, most people can’t believe how high their
utility bills are. Going with solar energy can lower your bills and you get a
hefty tax credit
Solar Tax Credit
Solar energy is a clean, renewable energy source. The production of solar energy
on residential and commercial structures creates no pollutants and is starting
to make serious financial sense. In 35 states, the concept of net metering is
now an established fact. Net metering simply means you can sell energy from
solar panel systems back to utilities, thus eliminating or seriously reducing
utility bills. As oil and natural gas costs skyrocket, the Federal Government is
doing even more to promote the use of solar energy.
In 2005, Congress enacted the Energy Policy Act. As part of the act, a tax
credit was established for any person purchasing and installing residential
solar energy systems for electric and water heating purposes. If you purchase
and install solar systems for either of these purposes, you can take a 30
percent tax credit. If you install systems for both of these purposes you can
double the tax credit. To avoid tax abuse, each tax credit has a cap of $2,000.
Importantly, tax credits are far more valuable than tax deductions. Tax
deductions are taken from your gross income prior to figuring the amount of tax
owed. Tax credits are a dollar for dollar reduction of the actual amount of tax
you owe. For instance, if you prepare your tax returns and find you owe $5,000
to the IRS, a tax credit would be deducted from this $5,000 figure. In short, a
tax credit gives you a lot more bang for your buck.
To claim the solar tax credit, there are a few restrictions and requirements.
First, you can’t claim the tax credit if you use the solar system to heat a hot
tub or pool. Second, the system must be certified by a solar rating
certification corporation to establish that you, in fact, installed a working
system. Third, the system must be activated between January 1, 2005 and the end
of 2007. Finally, you cannot claim the credit if the government gave you a grant
or financing to purchase the system, to wit, no double dipping.
When solar energy is discussed as a potential alternative energy source, most
supporters point to the environmental benefits. Ultimately, the benefits to ones
bank account will really make the difference and the solar tax credit is a solid
step in that direction.
About the Author:
Rick Chapo is with http://www.solarcompanies.com – a directory of solar energy and solar power companies. Visit http://www.solarcompanies.com/articlesto read more solar electricity articles.
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