Solar Investment Tax Credit Rampdown
Are you even aware of this? Have you claimed or are you claiming? Do you know this is decreasing? Did you know, solar energy still only represents 2.5% of energy production in the United States. Are you leaving money on the table?
In July this year, a 5 year extension was put through Senate and the House. Read more on this press release here.
Kentucky Solar Investment Tax Credit for Renewable Energy and Energy Efficiency
The old saying goes, money is better in your pocket than in theirs. The same applies when it comes to tax money too. If you are entitled to claim back money, then why are you not doing it? Are you aware of the solar tax credit expiration?
To give an example, here is an article from 10 years back which shows what was announced by the authorities. Ever wondered how many people were even aware of this? Out of those people, how many actually took part?
Saving Money and Helping the Environment in the Bluegrass State
Starting in 2009, Kentucky residents who install a renewable energy system, or make energy efficiency improvements in their homes, rental properties, or businesses can take advantage of a credit against their Kentucky state income tax. A tax credit is a direct, dollar-for-dollar reduction of your taxes, as opposed to a deduction, which reduces your income subject to tax. According to current legislation, this credit will be in effect from January 1, 2009 until December 31, 2015. Now the good news here is, this has been extended. The bad news is this will decrease after 2019.
How much is the credit?
The energy efficiency tax credit, according to the Kentucky legislation that established it, is broken down between a residential tax credit, a renewable energy system tax credit, and a commercial tax credit.
Residential tax credit
The residential tax credit applies to energy efficiency improvements you make in your principal residence or in a single-family or multi-family rental property you own. The credit is 30% of the installed cost of qualifying energy property, which includes heat pumps, central air conditioners, water heaters and advanced air circulating fans; weatherization improvements such as insulation, storm doors and windows; energy efficient heating, ventilating and air conditioning systems; and lighting systems.
There are dollar limits on the credit you can claim for individual items. You can claim up to $100 for upgraded insulation; up to $250 for energy-efficient windows and storm doors; and up to $250 per item for heat pumps, central air conditioners, water heaters and advanced air circulating fans. The maximum total credit for all items is $500 per taxpayer for residential energy efficiency improvements.
Renewable energy system tax credit
You can claim a credit for 30% of the installed cost of an active or passive solar space heating system, a solar water-heating system, a combined active solar space-heating and water-heating system; or a wind turbine or wind machine at your Kentucky residence, a rental property you own, or at your business. You can claim a credit of $3 per watt DC of rated capacity when you install a solar photovoltaic system to generate electricity.
The maximum credit is $500 per taxpayer if you install the renewable energy system at your principal residence or in a single-family rental property in Kentucky. If you install the system at a multi-family rental property or at a commercial property in Kentucky, the maximum credit is $1,000. Check out details of the solar tax credit expiration, so you don’t miss out.
Commercial tax credit
You can claim a tax credit for 30% of the installed cost of an energy-efficient interior lighting system up to a maximum credit of $500, or 30% of the installed cost of an energy-efficient heating, cooling, ventilation or hot water system, also up to a maximum of $500, that you install in a commercial property. The total maximum commercial tax credit is $1,000 per taxpayer. Commercial properties for this purpose do not include single-family or multi-family residential units.
In order to qualify for the tax credit, the energy efficiency improvements you make, or the renewable energy system you install, must meet certain requirements. According to the Database of State Incentives for Renewables & Efficiency, attic insulation must be R-38 or higher, exterior wall and crawl space insulation must be at least R-13, and floor insulation at least R-19.
An electric heat pump water heater must yield an energy factor of at least 2.0 according to the standard Department of Energy test procedure. A split central air conditioning system must have a seasonal energy efficiency ratio (SEER) of 15 and an energy efficiency ratio (EER) of 12.5. A packaged central air conditioning system must have an SEER of 14 and an EER of 12. A natural gas, propane, or oil water heater must have an energy factor of 0.80 or higher. And a natural gas, propane, or oil furnace, or hot water boiler must have an annual fuel utilization efficiency ratio of at least 95.
Solar active space heating, solar hot water, and solar photovoltaic systems must be installed by installers certified by the NABCEP (North American Board of Certified Energy Practitioners). Solar water heaters must have collectors certified according to the operating guideline standard OG-100 of the SRCC (Solar Rating and Certification Corporation) and must have at least a five-year warranty. Solar photovoltaic systems must meet the requirements of the National Electric Code and the solar panels and inverters must be rated and listed by Underwriters Laboratories.
Closed loop geothermal heat pumps must have an EER of 14.1 and a COP (coefficient of performance) of 3.6. An open loop geothermal heat pump must have an EER of 16.2 and a COP of 3.5. A direct expansion geothermal heat pump must have an EER of 15 and a COP of 3.5. Wind turbines must meet the industry standards developed by the AWEA (American Wind Energy Association) and the U.S. Department of Energy, the National Electric Code, and must be UL listed.
How to claim the credit
You claim the energy efficiency or renewable energy tax credit when you file your annual Kentucky state income tax return. The credit is nonrefundable, which means that if the amount of the credit exceeds your income tax liability you cannot receive a refund for the difference, but you can carry forward the unused portion of the credit for one year and apply the balance against your tax liability the following year.
You should keep copies of invoices, receipts, installation contracts, proof of the installer’s NABCEP certification, and any other information that supports the credit you are claiming. The Kentucky Department of Revenue may request copies of that documentation to verify the credit.