The American Recovery and Reinvestment Act of 2009 extended many consumer tax incentives that were originally introduced in the Energy Policy Act of 2005, and amended in the Emergency Economic Stabilization Act of 2008.
In most cases, a solar tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, whereas a deduction only removes a percentage of the tax that is owed. Consumers can itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.
Also, owning fuel-efficient vehicles and energy-efficient appliances and products provide many benefits such as better gas mileage, which means lower gasoline costs, lower energy bills, fewer emissions, increased indoor comfort, and reduced air pollution.
In addition to federal solar tax incentives, some consumers will also be eligible for utility or state rebates, as well as state solar tax incentives for energy-efficient homes, vehicles and equipment. Each state's energy office web site may have more information on specific state tax information.
Next, consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in existing homes can receive a tax credit for 30 percent of the cost, up to $1,500, for improvements "placed in service" starting January 1, 2009, through December 31, 2010.
Along these lines, consumers who install solar energy systems (including solar water heating and solar electric systems), small wind systems, geothermal heat pumps, and residential fuel cell and micro turbine systems can receive a 30 percent tax credit for systems placed in service before December 31, 2016, and the previous tax credit cap no longer applies.
Finally, individuals and businesses that buy or lease a new hybrid gas-electric car or truck are eligible for an income tax credit for these vehicle. This started on January 1, 2006, and purchased on or before December 31, 2010. The amount of the credit depends on the fuel economy, the weight of the vehicle, and whether the tax credit has been or is being phased out. Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard qualify for the credit.