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Renewable Energy – Tax Credit Incentives Make it Much More Affordable

Have you been considering installing a solar panel on your home or a wind generator in your backyard? Maybe you are thinking about installing a geothermal HVAC system to replace your current oil-fired boiler and air conditioning system. If you have, you’re not alone. Recently, many people have converted their existing out-dated heating and air conditioning systems with ones using geothermal, or other renewable energy sources.

These modern systems take advantage of free energy available to us all. Solar, wind and geothermal energy, for example, are free for the taking after the initial installation cost is paid. The system then pays for itself year after year.

Until recently, the cost of installation was the major drawback to these types of systems, but now there is good news for the homeowner. Federal and local governments have created new programs that include tax credits and rebates for consumers who choose to install energy-efficient and renewable energy systems. If you choose to upgrade your home’s current heating and air conditioning system or you are constructing a new home employing cleaner renewable energy sources, the federal government will pay for up to 30% of the cost–including installation. Add to this the various state tax credit and rebate programs, and the cost of installing your new solar panel, wind generator or geothermal system could be almost cut in half!

The federal tax credit program is currently in effect until December 2021. This is not a tax deduction; it’s a tax credit. Unlike a tax deduction, which may only be applied toward income, a tax credit is applied directly to the tax amount–dollar for dollar. Qualifying systems are eligible for up to a 30% federal tax credit.

Tax Credit:  30% of cost with no upper limit
Expires:  December 31, 2021
                Tax credits for Solar Energy Systems are available at 30% through December 31, 2019.
The credit decreases to 26% for tax year 2020; drops to 22% for tax year 2021 then expires December 31, 2021.

Federal Tax Credits for Energy Efficiency

Each state also has its own programs, which include tax credits as well as rebates for purchasing energy-efficient appliances bearing the Energy Star label. A list of each state’s programs can be found at dsireusa.org.

DSIRE. Database of State Incentives

If you have been thinking about installing a heating or air conditioning system in your home that utilizes these free and renewable sources of energy, then your decision just became easier. With federal and state governments paying for a good chunk of the cost of purchasing and installing these environmentally friendly systems, it makes good fiscal sense to take advantage of these programs. Also, the cost reduction you enjoy due to the tax credits means that the payback period is much shorter.


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