Individuals

The residential energy efficient property (REEP) credit is a tax credit of up to 30% of the expenses paid for solar electric, solar hot water, geothermal heat pump, small wind energy, and fuel cell property. In the case of fuel cell property, there is an additional cap on the credit of $500 for each half kilowatt of capacity.

To qualify for the credit, the property must be installed in the taxpayer’s new or existing U.S. residence prior to 2017. For fuel cell equipment, individuals may claim the credit only for property installed in their principal residence.

The credit covers both equipment and installation expenses, including the cost of piping or wiring the equipment into the home. Note, however, that the credit is unavailable for equipment used to heat a swimming pool or hot tub and is not available for leased equipment.

Individuals can claim the REEP credit for more than one qualifying item. Though the credit is nonrefundable (that is, limited by the amount of an individual’s tax liability for the year), any unused portion may be carried forward to future years.

Businesses

The business energy credit is equal to 30% of the cost of qualifying fuel cell, solar energy, and small wind energy property. A 10% credit is available to businesses for qualifying geothermal and microturbine property.

Businesses generally must place the property in service prior to 2017. (A 10% credit for certain geothermal and solar energy property will be available after 2016.) Moreover, the credit may not be available when the property is purchased using certain types of non-recourse financing.

Contact your Dopkins Tax Advisory Professional if we can help you determine if you or your business is eligible for either of these energy credits.