Alternative Energy Tax Credits

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An overlooked area of the Tax Code is Tax Credits and Grants for Alternative Energy Property.
Tax credits currently exist for solar, wind, geothermal and other types of alternative energy property. These tax credits cover up to 30 percent of the installed cost, and are eligible for five-year depreciation and bonus depreciation of 100 percent in 2011.

Since many installers of the property did not have enough taxable income to absorb a large tax credit, the government instituted a grant program for alternative energy property installed in 2010 or 2011. The grant is equal to the amount of the tax credit and is not dependent on taxable income.

By combining the tax credit/grant and the 2011 bonus depreciation, the federal government is providing 60 percent of the cost of alternative energy back in the first year of installation (at a 35 percent tax rate). This greatly reduces installation cost and shortens the return on the investment significantly.

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