This page was last updated: April 13, 2009.
Please note that the status of the tax credits reflects IRS rules effective during December 2008 - Updates are made when available.
Although we cannot provide you with Tax advice, we can provide you with general information of what may be available. Please contact your tax professional to find out details, or visit the website for North Carolina Incentives for Renewables and Efficiency to find out more.
The Charlotte Observer printed an article on April 12, 2009, showing what you can save on select projects. Below are two of the examples:
| SOLAR WATER HEATER | PHOTOVOLTAIC SYSTEM | |||
|---|---|---|---|---|
| Solar Hot Water Heater | $ 7,000 |
2-Kilowatt System | $21,200 |
|
| 35% State Tax Credit | -$ 1,400 |
35% State Tax Credit | -$ 7,420 |
|
| 30% Federal Tax Credit | -$ 1,800 |
30% Federal Tax Credit | -$ 6,360 |
|
| Federal Tax on State Credit (assuming 28% Tax Bracket) | $ 392 |
Federal Tax on State Credit (assuming 28% tax bracket) | $ 2,078 |
|
| TOTAL COST | $ 4,192 |
TOTAL COST | $ 9,498 |
|
| 40.1% Savings | $ 2,808 |
55.2% Savings | $11,702 |
|
For details and other savings potentials, please see details below:
What is a Tax Credit?
There is an important difference between a tax credit and a tax deduction. A tax credit is subtracted directly from the total tax liability. On the other hand, a tax deduction is subtracted from income before total tax liability is computed. This means that a credit is much more advantageous to the taxpayer than a deduction. For example, a tax credit of $500 is equivalent to a tax deduction of $1,785 for someone in the 28% tax bracket.
Replacing your older air conditioner, heat pump, or water heater could save $300 from your tax bill; Replacing windows could save you a maximum of $200; and installing insulation may allow you to take a credit for 10% of the material costs.
Tax Credits for general improvements
FEDERAL TAX SAVINGS
Home Energy Efficiency Improvement Tax Credits
Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $500 for improvements "placed in service" starting January 1, 2009 through December 31, 2009. The ENERGY STAR® website has a complete summary of energy efficiency tax credits available to consumers.
Residential Renewable Energy Tax Credits
Solar Energy Systems
Tax credits are available for qualified solar water heating and photovoltaic systems. The credits are available for systems “placed in service” from January 1, 2006 through December 31, 2016. The tax credit is for 30% of the cost of the system, up to $2,000. After December 31, 2008, this $2,000 cap will be removed for photovoltaic systems (but not solar water heaters). This credit is completely separate from the $500 home improvement credit.
Small Wind Energy Systems
Tax credits are available to homeowners who install residential small wind turbine systems. The credits are available for systems placed in service from January 1, 2008 to December 31, 2016. The tax credit is for 30% of the cost of the system, up to $500 for each half kilowatt of capacity with an overall maximum of $4,000.
Home Improvements
Home improvement tax credits are now available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Any qualified home improvements made in 2008 are not eligible for the tax credit.
Home improvement tax credits are available for insulation, replacement windows, water heaters, certain high efficiency heating and cooling equipment, and biomass stoves. See chart. The maximum amount that a taxpayer may claim from all of these tax credits combined is $500 over the lifetime of the tax credit (2006, 2007 & 2009).
If you are building a new home, you can qualify for the tax credit for photovoltaics, solar water heaters, small wind systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.
See IRS Notice for more details.
For IRS purposes, the costs are considered paid when the original installation of the item is completed; The tax credit can be claimed on your taxes only at the end of the year.
NORTH CAROLINA TAX SAVINGS
Consumers who install solar electric systems can receive a 35% tax credit for systems placed in service through December 31, 2010. A limit of $1,400 exists for solar water heating and pool heating, $3,500 for active and passive space heating, combined space and water heating systems and a limit of up to $10,500 exists for photovoltaic (solar energy) systms.