Tax Credits Federal (IRS) tax credit for eligible solar energy systems 

For residential solar energy systems (solar electric and solar domestic water heating) the tax credit is 30 percent of the cost up to $2,000. However, the individual is limited to $2,000 a year in credits for spending on photovoltaic property and another $2,000 a year for spending on solar water heatingproperty. Essentially, the government pays 30% of the first $6,667 in the cost ofphotovoltaic property and the same amount for solar hot water heating property. It is not possible to maximize credits by spreading expenditures on the property over the two years in which the credit is available, an individual is considered to have spent thefull amount in the year that installation of the qualified solar property is completed. If the system is included as part of construction of a new house, then the spending occurswhen the taxpayer takes residence of the house. 

For business solar energy systems (solar electric and solar domestic water heating) the tax credit is 30 percent of the cost. Systems must be placed in service between January 1, 2006 and December 31, 2008. Systems designed to provide pool heating are not eligible for the tax credit. For tax credit forms, visit the Internal Revenue website at www.irs.gov

 The National Solar Energy Industries Assocation (SEIA) has published a guide to the Federal Solar Tax Credits.  Download the guide here.