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Now may be the best time to implement an energy efficiency project in your home. That's because U.S. taxpayers can receive tax credits on residential renewable energy systems using solar, wind or geothermal sources. As part of the American Recovery and Investment Act of 2009, homeowners will receive tax incentives to encourage home improvement and provide more business for contractors dealing with alternative energy sources.

Taxpayers can receive 30% tax credit on the cost of qualifying solar, geothermal and wind energy systems. There is no limit on the credit that homeowners can claim for these energy-efficient home improvement projects up to December 31, 2016. Qualifying homes include primary residences, second home, existing homes, and new construction. Rentals do not qualify for the incentive. Excess credits can be rolled over to the succeeding year.

Tax Credits for Residential Renewable Energy

Mainstream home improvement projects such as energy-efficient windows, roofs, HVAC and the like can claim a maximum tax credit of $1500. However, tax credits for renewable energy systems placed in service in 2009, 2010 and through December 31, 2016 have no limit.

The following residential renewable energy systems qualify for tax credit:

1. Solar-electric system: Systems placed in service before January 1, 2009 qualify for a maximum credit of $2000 but systems installed after 2008 have no cap on tax credit. To enjoy the incentive, the solar-electric system must be placed in service on or after January 1, 2006 and on or before December 31, 2016.

2. Solar water-heating system: The equipment must be certified by the Solar Rating Certification Corporation. In addition, the system must provide at least half of the energy required to heat the dwelling unit's water. The credit cannot be applied to solar water-heating property for hot tubs or swimming pools.

3.Fuel cell property: The fuel cell must have a nameplate capacity of at least one-half kilowatt of electricity and must be installed at the taxpayer's principal residence. The maximum tax credit is $500 per 0.5 kilowatt.

4. Small wind-energy system: There is no cap for residential wind-energy systems placed in service after 2008.

5. Geothermal heat pumps: The product must meet or exceed federal Energy Star program requirements in effect at the time installation is completed.

Finding Qualified Contractors

Residential renewable energy systems are fairly new, and the average contractor may not have much experience with energy efficient remodeling projects. Find contractors with experience in solar, wind and/or geothermal energy systems in the area where the home is located. They will be able to advice you on renewable energy systems that are eligible for tax credits and recommend reputable suppliers.

Looking for home energy savings? Check out our recommended energy saving products today!

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