$2000 federal tax credit for PV systems

uNkNowN ElEmEnt

Don't know if this has been posted elsewhere, but just in case:

Additionally, the new law makes a credit available to those who add qualified solar panels, solar water heating equipment, or a fuel cell power plant to their homes in the United States. In general, a qualified fuel cell power plant converts a fuel into electricity using electrochemical means, has an electricity–only generation efficiency of more than 30 percent and generates at least 0.5 kilowatts of electricity.

Taxpayers are allowed one credit equal to 30 percent of the qualified investment in a solar panel up to a maximum credit of $2,000, and another equivalent credit for investing in a solar water heating system. No part of either system can be used to heat a pool or hot tub.

More details:
http://www.irs.gov/pub/irs-drop/n-06-26.pdf

oilfreeandhappy

A decent sized PV system will run anywhere from $20,000-$50,000. The tax credit is something, but unless electricity prices in the area are high, it may not be a good financial investment. Some utilities are putting up hefty rebates in some states, which makes an investment more attractive. Usage rates of electricity in my area are only about $.035/ KWh. So I would only save about $200-$300 a year with a PV system.

justgas · Tar Sands Joined: Dec 06, 2005 Posts: 24

The solar hot water systems make a lot more sense from what I read. You might even be able to get one of them installed in the next three years. If you live in a climate with a long cooling season, the heat pump water heaters sound like they make a lot of sense. The US tax credit for them is only $300 dollar.

Oilfree: I can't believe you are only paying 3.5 cents per kWh. Western Pennsylvania supposedly has rates that are 24% below national averages and I am paying $0.67 per kWh with all the charges; generation, transmisssion and distribution included. $0.035 sounds like just the generation charge.

In Colorado, if you have a basement that you use for living space the best way to take advantage of the new tax credits might be to insulate the basement. Tax credit: 10% of cost up to $500. per http://www.energy.gov/taxbreaks.htm
(If you are in the 15% tax bracket, a $500 tax credit is like knocking $3300 dollars off of your taxable income.)
Energy savings: $310 with R10 insulation per http://www.eere.energy.gov/buildings/documents/pdfs/26455.pdf

Caoimhan · Intermediate Crude Joined: May 10, 2005 Posts: 562

The cost to manufacture PV systems is coming down, but the high demand vs. the supply is keeping prices too high for most people. We need PV companies to ramp up production... but they need capital to do that. Capital can come from profits, private investment, loans, or public investment. In the long run, it might be cheaper for the tax-payer if a little "corporate welfare" were to come from government to the PV manufacturers to build new manufacturing facilities.

justgas · Tar Sands Joined: Dec 06, 2005 Posts: 24

oops there's a typo on electric prices in western PA should read $.067 or 6.7 cents per kWh

dbarberic · Heavy Crude Joined: Sep 27, 2005 Posts: 240

I was excited about a PV home install until I did the analysis of the cost and payback period. PV installs only seem to be making financial sense for NJ or CA where you can get both a heft Federal and State rebate on the purchase price and reduce your payback period to a more reasonable time frame (~10 years). In Ohio (where I live), I would only get the Federal rebate and my payback period at current electric rates is around 25 years.

One tax trick that I'm trying to determine if it is possible and legal is if you can get the Federal tax rebate of $2K on PV upgrades. If so, I was thinking that during year 1 you could do a inexpensive PV install to capture the $2K federal tax credit and then in year 2, do a PV upgrade to capture an additional $2K federal tax credit. Your installation cost would be spread out over two years and you would net $4K off of your PV system cost. I will need to talk to my CPA about that idea.

Caoimhan · Intermediate Crude Joined: May 10, 2005 Posts: 562

I know people who have no electric bill because of their PV installation. They use an installation that is about 75% of their peak requirements, but they arrange for time-based metering, which charges a different rate for different times of day.

In SoCal, the highest rates are during the afternoon, when the sun is strong and people are blasting their A/C in the Summertime.

But that's when the PV system is running at it's optimum... while they're at work, and their thermostat is set to 80. Their PV is pumping electricity back into the grid, and they get credit at the higher daytime rate.

In a big house, that can save a couple thousand per year. (Some SoCal homes have $200/month electric bills).

dooberheim

Like many of these credits, you have to have a professional install the system to get the credit. I hate that. I am a do-it-yourself kind of guy, and the satisfaction I will reap from having power (and being able to repair my system) when the rolling blackouts hit this summer or next will more than pay for the few hundred in taxes I will save.

PV systems are never cost effective. And a PV system that relies on the grid for backup will be pretty useless in an electric energy crisis. Better to just suck it up and install a stand alone system, with batteries, wired in parallel with your regular house wiring. Then, when the grid becomes unstable, you just plug in what you need (and this will quickly determine what you really NEED) and keep on going.

DK
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