In 2006, President Bush signed The Tax Relief and Health Care Act of 2006.  The Act extended many tax credits that were available to consumers and businesses through tax years ending December 31, 2008.  Among these tax credits are credits for purchasing and installing solar powered energy and heating equipment as well as building energy efficient homes.

The following credits are part of the tax relief package for businesses:

- Energy Efficient Home Credit: This credit is currently available to homebuilders and modular home manufacturers who build or manufacture homes that are at least 30% to 50% more energy efficient than other comparable homes.  Solar power is often times the main power source in these homes.  The tax credit is either $2,000 per home built (if meeting the 50% requirement) or $1,000 per home built (if meeting the 30% requirement).

- General Business Energy Credit: The general energy credit is available to any business who invests in energy property.  The energy credit is equal to 30% or 10% of the cost to purchase eligible energy property.  The rate of the credit depends on the type of property.

In addition to the business credits described above, there are energy tax credits available to form 1040 filers.  The Residential Energy Efficient Property Credit gives a credit up to $2,000 for purchasing solar equipment that cools/heats a home/water (not including the swimming pool).  In certain instances, the home in which the equipment is installed can be a vacation home.

It is important to note that in all cases above, the equipment and home needs to meet various governmental standards.  Also, the credits may be limited to certain taxpayers depending on their Alternative Minimum Tax status or other limitations imposed by the Act.

In addition to the Federal credits, there are incentive programs offered by many of the states.  For instance, in an effort to increase "green" spending, the State of New Jersey offers cash rebates to businesses who invest in solar electric systems.  The state incentives are often many times more valuable than their Federal counterparts.

The enactment of these tax credits and incentives should lead investors and consumers to reevaluate the economics of these emerging technologies.  More importantly, the recent surge in energy prices has shortened the payback period of many of these technologies.  The current market conditions combined with the government initiatives should be enough to get everyone thinking "green."  For more information please feel free to contact us.