All About Residential Clean Energy Tax Credit That Rewards Americans for Adopting Sustainability
With climate change jostling the planet and energy costs hitting household budgets in already volatile economic conditions, the use of sustainable devices in homes has gained popularity. An increasing number of homeowners are now seeking ways to reduce their carbon footprint and lower their energy bills, making devices such as solar panels, special heaters, and wind turbines popular for harnessing renewable sources of energy sources including the sun and wind. Now Americans can also get rewarded for turning to sustainable energy sources, in addition to the money they save, through Residential Clean Energy Tax Credit.
Understanding the tax benefits
Through Residential Clean Energy Tax Credits, homeowners installing solar panels and wind turbines, can slash their federal taxes by 26% of the cost of installing these systems. The maximum credit can range from $500 to $2000 depending on the system installed. This credit is not just applicable for the energy devices but for the installation cost as well as it is quite a hefty expense for many families. Besides solar water heaters and small wind turbines, there are many other energy sources that people can install to get the benefits of the Residential Clean Energy Credit.
First is the Geothermal heat pumps which are also known as the ground source heat pumps. These devices will give you a credit worth up to 30% of what you spent on either buying or installing them. Before availing of the rebate, make sure you meet the eligibility criteria set by the Energy Star program. Next is the Biomass stoves that use plant-based fuels like wood pellets, chips, or cordwood to create energy. With this, you can save a tax credit of $300 per stove.
How to apply for credits?
Solar water heaters are pretty useful in managing chores such as heating water for your home or for open-terrace swimming pools. Once you have purchased and installed an eligible solar water heater in your home within the United States, you can easily claim this tax credit. If you apply for the Residential Clean Energy Credit for solar water heaters you will get back up to 30% of the amount you invested in purchasing and installing. This will include both the flat-plate and evacuated tube solar hot water systems. To qualify for the rebate, at least half of the energy your solar heater uses must be generated from the sun, and the system must also be certified by the Solar Rating Certification Corporation or another government-approved organization.
Another way to avail of the Residential Clean Energy Credit is to install small wind turbines. To qualify for one of these, your home wind turbines must mention that they work on a power capacity of 100 kilowatts or less. This will help you avail the tax credit. For wind turbines installed between 1st January 2022 and 31st December 2032, the users are eligible for a credit cover of 30% of the cost i.e. the purchase and installation. The maximum credit allowed per kilowatt of capacity is $500. Say, for example, if you set up a 5 KW turbine that costs $15,000, your maximum credit would be $2,500 (i.e., 5*$500). As per the cost the credit has to be $4,500 which is 30% of $15,000 but due to the per kilowatt limit, the credit cap is set at $2,500.