The EPAct And
Solar Panel Incentives
A solar panel system seems to be an excellent way of
generating less costly electrical power. A solar panel system
can be used to either heat water, the air inside homes, and to
supply pretty much any appliance that runs on electricity.
People who use a solar panel system or more to power their needs
should be the IRS' friends, since the United States government
alleges to be seeking alternative energy sources. So in this
case one might think that the same government would give some
tax credit to those who choose to invest in green energy
sources, like in a solar panel system for example.
Well the
value of solar panel systems in the IRS' eyes is shown in the
Energy Policy Act of 2005 for Individuals. The EPACT says that
any individual can make energy-conscious purchases, and will
receive some tax benefits from doing so. The law will provide
you with tax credits if you make your principal residence, which
must of course be in the U.S., more energy efficient. The same
Act will also give you some tax credits for buying specified
energy-efficient items, like hybrid cars.
Having solar power systems will also earn tax credits only if they
are on your main home, and if that home is situated in the U.S.
A large part of the EPACT will remain in effect throughout this
year, and it is expected to be renewed or expanded in 2008.
The EPACT of 2005 makes tax credit available to those
individuals who add qualified solar panels to their homes in the U.S. one could credit up
to $4,000 if they have both a solar panel system and a solar
water heating system installed. The IRS allows one credit equal
to thirty percent of the qualified investment in a solar panel
system up to maximum $2,000, and it will also allow an equal
credit for a solar water heating system. However you can't heat
a hot tub or swimming pool with a solar panel system or a solar
water heating system; furthermore in order to qualify for the
IRS tax credit qualification, the solar panel system whatever
its type must be placed in service between December 31, 2005 and
January 1, 2008.
The IRS isn't the only institution that
will offer incentives for a solar panel system. You may also be eligible for state
rebates or tax incentives; you need to ask for information at
your state's energy office. Your state may give incentives for
installing solar
panel systems, and the IRS tax credit will apply to the
basis remaining after you have already taken the state
incentives.
Now if you're thinking that a tax deduction is
better than a tax credit you need to know that while a tax
deduction will take away a percentage of the tax you owe, a tax
credit will reduce your tax, dollar-for-dollar. So in principle,
tax credit is better than tax deduction.
Even if EPACT
wouldn't have been signed into law, and even if the IRS wouldn't
offer tax credits for solar panel systems, installing them would still prove to be
a wise investment. Many solar panel users find that a solar panel array will pay for itself within three to four
years of use, and then with a little maintenance a solar panel
system will save you money on your electricity bill.
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