Now available: IRS Form 5695 & Instructions: Residential Energy Credits for Tax Year 2007

The Energy Policy Act of 2005 (H.R. 6, Sec. 1335) established a 30% tax credit for solar equipment capped at $2,000.  Initially scheduled to expire at the end of 2007, the tax credits were extended through December 31, 2008, by Section 206 of the Tax Relief and Health Care Act of 2006 (H.R. 6111).

The credit is calculated based on the individual’s expenditures for the equipment and installation, excluding any subsidies.

To be eligible for the credit, a system must be "placed in service" or activated on or after January 1, 2006, and on or before December 31, 2008. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the "placed in service" date is the date of occupancy by the homeowner.