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*****Update on Federal Tax Credit -- The Senate failed to pass an extension of the federal tax credit in their economic stimulus package. It seems more and more likely that 2008 will be the last year this credit is available!*****
While Washington State isn't quite as RE-friendly as California or New Jersey, Washingtonians can take advantage of tax credits, tax exemptions, and production incentives.
- Federal Income Tax Credit:
The federal government is giving us a tax break through 2008 with a 30% credit on solar hot water (except pool heating) and PV systems. For residential installations, the credit is capped at $2000. There isn't a cap on commercial systems.
For more information about this tax credit visit the following links:
- DSIRE database link for information about commercial tax credit
- IRS Form 3468 and instructions
- DSIRE database link for information about residential tax credit
- IRS form 5695 and instructions
- For Businesses -- The Commercial Federal Tax Credit and Depreciation:
Businesses get more good news from the IRS. First, both PV and solar hot water systems are 5-year properties for the purpose of depreciation. Second, under a special rule in the Internal Revenue Code, the depreciation basis for PV and solar hot water systems is only reduced by half of the federal tax credit. That's right! A business that installs a solar thermal or PV system (or both) gets a tax credit of 30% and can also depreciate 85% of the cost of its system(s) over only 5 years.
Incredulous? We certainly were. Links below will take you to the the Solar Energy Industry Association's Guide to Federal Tax Incentives for Solar Energy, the Internal Revenue code online, and the IRS website. A caveat ... we are neither accountants nor tax attorneys. Consult with your tax professional.
- SEIA manual -- Please note that this document was prepared in early 2006 prior to the extension of the federal tax credit through 2008. The information in the manual refers to renewable energy systems installed in 2006, 2007, and 2008. The discussion of depreciation basis begins on page 17.
- Internal Revenue Code -- Scroll way down to section C, Basis adjustment to investment credit property for the special rule concerning basis adjustment and the energy credit.
- IRS publication 946, How to Depreciate Property -- See page 30, topic Depreciable Basis for reference to section 50(c) of the tax code; page 33, section 2h for listing of energy systems as 5-year property for depreciation.
WA State Sales Tax Exemption:
Materials and installation of solar electric, solar hot water, wind, and micro-hydro power -- grid-tied or not -- are exempt from Washington State sales tax. This exemption will last until 2011.
Details at:
- DSIRE database
- WA State Legislature
- Production Incentives:
Washington State has legislated production incentives. In our area, PSE customers who generate power with grid-tied solar PV arrays, wind turbines or anaerobic digesters are eligible for production incentives as high as 54 cents/kilowatt-hour up to a maximum of $2000 per year. This program is currently legislated to run through June 2014.
Basic rate is 15¢
- Multipliers:
WA inverter x 1.2 = 18¢
WA PV x 2.4 = 36¢
Non-WA equipment x 1 = 15¢
Non-WA wind x .8 = 12¢
- Production credits are cumulative. For example, a PV system with both solar modules and inverter manufactured in WA state, would earn a production credit of 54¢. For the fine print see:
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PSE website
- DSIRE database
- WA Department of Revenue information
- WA Department of Revenue application
- Green Tags:
Owners of residential wind or PV systems may also earn 2 cents/kilowatt-hour for every kWh produced and net-metered back into the energy grid by selling Green Tags through Northwest Solar Co-op. Payments continue for 2 years from signing of contract. For the particulars:
-
Cascade Solar's website
A printable hand-out on renewable energy financial incentives can be accessed here. It is a PDF file and will open in another window.
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