Tax credits melt costs for solar hot water heaters | KEYE Austin - Green Right Now Austin News, Weather, Traffic KEYE-TV Austin - HOME
Mar 022009

By Clint Williams
Green Right Now

Hot showers are now on sale.

The $787 billion economic stimulus package signed into law last month by President Barack Obama expands the tax credit for the purchase of a solar water heating system, significantly reducing the price tag of a system.

The federal tax credit had been capped at $2,000. That limit is now lifted and the tax credit is 30 percent of the cost of a solar water heating system.

And a tax credit is much more valuable than a tax deduction.

Let’s say you install an $8,000 system. Your 30 percent tax credit is $2,400. Next April you figure you owe Uncle Sam $3,400. Subtract the $2,400 and now you’re writing the Internal Revenue Service a check for just $1,000.

Add in state tax credits and local utility rebates available in some states and you drop your upfront costs even more. But whatever your out-of-pocket expenses, it’s a good investment, solar advocates say.

Heating water for showers, laundry and washing the dishes accounts for 25-30 percent of the energy use of a typical home. An estimated $13 billion is spent each year for home water heating in the United States.

How much a solar water heating system saves you depends on where you live and how you’re now heating your water.

“If you’re heating with oil, or if you have an electric hot water heater, the economies are outstanding,” said Les Nelson, Executive Director, Solar Rating & Certification Corporation.

A solar system can pay for itself through utility bill savings in three to five years, Nelson said.

Playing around with a calculator available at Solar shows how the savings vary. For example, installing a $6,000 system on the roof of an Atlanta home would cost about $2,700 after federal and state tax credits. The monthly utility bill would drop $38-$57 if heating with electricity; $28 if heating with natural gas.

In hot and sunny Phoenix, you need a smaller system and your net cost after tax credits and rebates is just $1,465. You can expect to cut your electric bill by $39 to $58 a month.

The previous federal income tax credit for solar water heaters – capped at $2,000 – boosted installation of the systems, Nelson said. The number grew from about 6,000 a year before the $2,000 credit to 20,500 in 2008.