AWEA does not provide tax advice and nothing in this document is intended to constitute tax advice. Taxpayers should consult their own tax advisors with respect to any questions regarding the application of Federal or state or local tax law. Nothing contained in the body of this document is intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

For an eligible system used in conjunction with a residence: 30% of the total cost of equipment and installation, but not to exceed the lesser of $4,000 or $500 per ½ kilowatt of capacity.
For an eligible system used for trade or business applications: 30% of the total cost of equipment and installation, not to exceed $4,000.

A 5 kilowatt (kW) system used for a home and costing $30,000 installed would receive a $4,000 credit. (The least of: 0.30 x $30,000 = $9,000 –OR- $4,000 –OR- $500 x 2 x 5kW = $5,000)
A 50 kW system used for a dairy farm and costing $200,000 installed would receive a $4,000 credit. (The least of: 0.30 x $200,000 = $60,000 –OR- $4,000.)

A system owner can use the credit in addition to a state credit or rebate, federal grant, or other government incentive. However, in determining the amount of credits allowable with respect to certain government-subsidized projects, the taxpayer must reduce the cost of the project to reflect the government subsidy.

Both the residential and business credits can offset the tentative minimum tax of the taxpayer.

If a system owner cannot use the entire amount of the credit in a taxable year because of insufficient tax liability in such year, the unused amount of the credit may be carried forward to and used in a succeeding taxable year (subject to similar limitations in such succeeding year.)
Owner and Equipment Eligibility

In the case of the business credit, the definition of qualified property is property that uses a wind turbine with a nameplate capacity of not more than 100 kilowatts to generate electricity. The property must be constructed or erected by, or the original use of the property must begin with, the taxpayer. The property must be of a character for which depreciation is allowed. The Secretary of the Treasury, in consultation with the Secretary of Energy, may prescribe performance and quality standards for qualified property. Such regulations will be applied prospectively.
In the case of the residential credit, the definition of qualified property is property that uses a wind turbine to generate electricity for use in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.
Expenditures that are allocable to a swimming pool, hot tub, or any other energy storage medium that has a function other than storage does not qualify for the credit. In general, the original use of the property must begin with the taxpayer.

In general, the property must be new. Tax rules that determine when refurbished equipment is treated as new property are complicated and beyond the scope of this document. A consumer should consult a tax advisor with respect to this and any other issue involving the credit.

In the case of the “non-residential” credit, the property must be of a character for which depreciation is allowed. This generally means that the property is used in a trade or business or held for the production of income.

For-profit utilities are eligible for the credit. Municipal power systems are not.

For-profit schools are eligible for the credit. Public and tax-exempt schools are not.

In general, the owner of the property may claim the credit. In the case of a lease, complicated tax rules determine the owner of the property for tax purposes. A consumer should consult a tax advisor with respect to this and any other issue involving the credit.

The legislation does not distinguish between principal residences and second homes.

If less than 80% of the use of an item is for non-business purposes, only that portion of the expenditures for such item that is properly allocable to use for non-business purposes may be taken into account for purposes of the residential credit.

There is no limitation based on a single location. The $500 per half-kilowatt limitation is a turbine-by-turbine limitation. The $4,000 cap is a taxpayer-by-taxpayer limitation. Both are annual limitations.

For the residential credit, in the case of a dwelling unit that is jointly occupied and used by two or more individuals for a calendar year, the maximum expenditures that may be taken into account for all individuals is $1,667 for each one-half kilowatt of capacity (not to exceed $13,333) of wind turbines. The $1,667 and $13,333 amounts are allocated among the individuals based on their respective qualified expenditures. Special rules apply in the case of cooperative housing and condominiums to allocate credits among the residents.

See answer to question 14 above.

The credit applicable to businesses applies to periods after the date of enactment (October 3, 2008). The residential credit applies to taxable years beginning after December 31, 2007.

See answer to question 16 above.

The credit applicable to businesses applies to qualified property when it is placed in service. “Placed in service” is a technical tax term and the determination is based on the underlying facts and circumstances. In general, property is placed in service when it is in a condition or state of readiness and available for its intended use.

As described above, the credits generally are applicable with respect to completion activity, not initiation activity.

The credits will be claimed on the tax return of the taxpayer for the year for which the credit is claimed. Business credits generally are claimed on Forms 3468 and 3800 and individual energy credits generally are claimed on Form 5695.

A consumer should consult its tax advisor with respect to any issue involving either credit.