How2Day: Solar Power Incentives for Homeowners

Solar energy systems can offer homeowners tax savings. Photos.com/Photos.com/Getty Images
The U.S. government offers tax incentives to homeowners investing in renewable solar energy through the Emergency Economic Stabilization Act of 2008 and other energy efficiency tax credits. Homeowners can also receive financial and tax incentives from the states in which they live. For instance, many states offer homeowner's tax rebates for a portion of their solar power purchases. Specific incentives vary by state.

Homeowners who invest in solar power appliances such as on demand solar powered water heaters can receive a tax credit of 30 percent of the purchase price of the appliance, up to $1,500. To qualify for the credit, homeowners must install the appliance in their existing primary residence. New construction and investment properties do not qualify for this credit. Any solar powered equipment must have a manufacturer's certificate of energy efficiency.

The IRS offers additional tax credit incentives for homeowners who invest in solar powered equipment such as solar panels. Homeowners can take a tax credit of up to 30 percent of the total cost of the equipment. This cost includes all labor and installation costs for solar powered energy equipment. The IRS does not impose a limit to the dollar amount of this credit. Both primary and secondary residences qualify for the credit. Homeowners cannot take this credit for investment property.

State rebate programs for solar energy equipment vary. Commonly, states offer a percentage of the purchase price of the solar powered equipment in the form of a tax rebate. Many states also offer an electricity buyback, where the homeowner can sell back the excess energy collected by their solar powered energy system to a major electric company in the state. For example, Michigan residents can sell their excess energy collected through solar energy systems to Consumer's Energy for $.525 per kilowatt-hour as of 2010.

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