The Energy Policy Act of 2005 (Epact) provides incentives in the form of tax credit to individuals purchasing and installing solar equipment. Purchases made between January 1, 2006 and December 31, 2008 may qualify for tax credit in the form of a dollar-for-dollar reduction in tax liability. 

Purchases made anytime thereafter may qualify for a 10% tax credit.   This particular incentive is the first tax credit ever offered to residential buyers.  Commercial users may qualify for a 30% reimbursement with no cap, and photovoltaic buyers can earn a tax credit of 30% up to the first $2,000 spent on equipment and installation.

Customers can consult The SEIA Guide to Federal tax Credits for Solar Energy, a 40-page manual produced by the Solar Energy Industries Association.  "The passage of the solar tax credits was an historic moment for solar energy development in the United States.  Already, the tax credits are encouraging states and private industry to invest in solar power, fueling market growth and making solar more affordable for more Americans. This tax manual provides guidance for solar companies and consumers to fully utilize the federal incentives.”  Rhone Resch, President of SEIA (www.seia.org).

Amongst the many provision in the EPAct were; increased loan guarantees for innovative technologies in the field of renewable energy, increased coal use in the US, it increased the amount of biofuel mixed with gasoline, it authorized subsidies for wind power and for the first time recognized wave and tidal power.  The act also requires the US Department of Energy to study natural energy sources as well conducting a study on demand response.    It extended daylight savings time by four weeks, provided incentives to companies drilling in the Gulf of Mexico, and banned drilling under the Great Lakes. The bill did not contain provisions for drilling in the Arctic National Wildlife Refuge (ANWR) in Alaska.

For homeowners, the EPAct offered an additional tax credit of 10% for exterior window replacement, insulation systems that reduced heat loss and exterior doors.  Circulating fans warranted a $50 credit, gas, propane, or oil furnaces and hot water heaters were given a $150 credit and $300 was given to other qualifying items of improved efficiency.

Many of the provisions listed in the EPAct expired December 31, 2007.  Expenses incurred while making environmental improvements on windows, doors, HVAC systems, insulation and non-solar water heating systems are no longer qualified for those tax credits.  However, solar powered water heaters do qualify until December 31, 2008.

In February of 2008 the House passed an $18 billion energy efficiency incentive plan, which was similar to the one that expired in 2007.  The Senate and the president must still approve it.