real estate

Solar system still generates a tax credit

Steve McLindenQuestionDear Real Estate Adviser,
In buying a home, can the builder pass through his federal solar tax credits to me? Aren't some of these programs getting eliminated due to the budget crunch?
-- George M.

AnswerDear George,
Technically, your homebuilder could pass forward these credits to you indirectly in the form of a reduced sales price. But that's not how the program works. Your best savings opportunity will come through your own use of federal solar tax credits, assuming you're buying a home with solar equipment used for generating electricity or heating water or both, which appears to be the case. The builder will get the tax credit separately.

It's true that tax credits for energy-efficient purchases that were available to individual taxpayers in 2009 and 2010 for HVAC systems, water heaters, windows, doors, insulation products and biomass stoves have been reduced in 2011. But the relatively generous solar tax-incentive program created a couple of years ago remains intact.

Hence, you can recoup 30 percent of your costs for this equipment with no upper limit through Dec. 31, 2016. Existing homes and new-construction homes qualify, and these include principal residences as well as second homes. So it's quite likely you'll be eligible in these scenarios. Make sure your homebuilder segregates the costs of your new home's solar equipment for your tax purposes. The same federal energy tax credits, by the way, apply to purchases of small wind turbines and geothermal heat pumps.

Such solar programs typically work best when coupled with state rebate programs offered in California, Connecticut, Louisiana, Missouri, New Jersey, New York and other states. For a list of state-by-state solar incentives, visit the Database for State Incentives for Renewables and Efficiency, or DSIRE. Many cities now offer their own solar-incentive programs, so also check with your municipality.

In some states, electricity providers will pay you for excess energy that your solar system produces, while in others, you can feed excess electricity into the grid for later use during a set billing cycle. In the latter case, the idea is to size your system to end up as close as possible to net zero -- a process referred to as "net metering."

Good luck. May the sun shine e'er brightly on your new home -- especially its solar panels!

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