a small wind turbine on the left with a text bubble on the right that says Tax Credits?

If you’re considering installing a wind power system, go for it. You can apply for small wind turbine tax credits to help offset some of the expenses of building the system. Which credits are available?

The federal small wind turbine tax credits you can apply for range from 22 to 30 percent off your costs. The rate depends on the year you placed the system in service.

You may also qualify for a tax credit of up to 30 percent for a standalone energy storage unit to work with your wind power system.

In the rest of this article, I’ll discuss the federal residential clean energy tax credit for small wind turbine projects in more detail.

You’ll find out who qualifies for the credit, how you can maximize your savings, and when the tax break expires.

The Two Types of Federal Tax Credits You Might Qualify for If You Own a Small Wind Turbine

Installing a wind power system at your home comes with many benefits.

First, it’s good for the environment because wind energy is clean and renewable.

You can also save on utility bills and use the savings to upgrade your heating system and other appliances to more energy-efficient options.

The federal government gives tax credits to help homes transition to renewable power and energy-efficient systems.

a house roof with solar panels on it, and a small wind turbine at the top
windmill and home with solar panels, eco energy

The Residential Clean Energy Credit offsets a portion of the cost of building a domestic renewable energy system. It covers wind, solar, and other renewable power system types.

Another federal tax credit you may qualify for if you own a small wind turbine is the energy storage system rebate.

Since power from renewable sources such as solar and wind can be unstable at best, it helps to store the excess energy for later use.

If you build a standalone battery energy storage unit at your home, you may be eligible for a tax credit to offset part of the project cost.

Who Qualifies for the Federal Residential Wind Turbine Tax Credits?

Small wind turbine tax credits are available for those building wind power systems for domestic use at home, not rental properties.

Only systems that generate up to 100 kilowatts of electricity are eligible for the federal residential clean energy incentive.

The credit is available for systems built from 2006 onward.

You can claim the wind turbine tax credits for systems built at your primary home and a second residence.

Do Small Wind Turbine Tax Credits Include Installation?

Small wind turbine tax credits cover the cost of equipment purchase and installation expenses.

You need to prove you incurred these costs, so it helps to keep the documents the IRS might want for proof.

Here’s how the small wind turbine tax credits are calculated:

  • 30 percent for systems put in service by the end of 2019
  • 26 percent for systems put in service in 2020 and 2021
  • 30 percent for systems put in service between 2022 and 2032
  • 26 percent for systems put in service in 2033
  • 22 percent for systems put in service in 2034

How Does the Federal Residential Wind Power Credit Work?

A tax credit directly reduces your tax liability.

If the credit is more than how much you owe in taxes, you can use that extra credit to offset your tax bill for the next five years.

There’s no maximum project cost requirement for residential wind turbine tax credits.

As a result, you can save significantly with this incentive if your system’s electricity capacity is within the acceptable limit.

A woman wearing a blue button-down blouse adds change to a ceramic pink piggy bank to calculate savings for small wind turbine tax credits
You could have extra money to put toward your tax bill with small wind turbine tax credits!

Standalone Battery Storage Credit

An investment in your home’s energy storage system can also qualify for a tax credit.

Standalone battery storage units with a capacity of at least 3kWh are eligible for the tax rebate.

Here’re the standalone energy storage system credit rates:

  • 30 percent for systems put in service between 2023 and 2032
  • 26 percent for systems put in service in 2033
  • 22 percent for systems put in service in 2034

Renewable Energy Production Tax Credit (PTC)

The production tax credit (PTC) is another option that allows developers and owners of wind energy facilities (offshore and land-based) to claim a federal tax credit for each kilowatt-hour of electricity sold.

To qualify, the electricity must be sold to an unrelated party for a period of at least 10 years after a facility is placed into service.

Although the renewable energy PTC expired for wind at the end of 2021, the Inflation Reduction Act (IRA) extended it to 2024.

However, only wind energy projects that satisfy the new apprenticeship and wage requirements can qualify for an inflation-adjusted credit of 2.6 cents per kilowatt-hour for the initial 10 years of electricity generation.

Business Energy Investment Tax Credit (ITC)

The ITC is a federal income tax credit for capital investments in renewable energy projects. It’s a one-time credit based on the cost of the project in dollars and is only earned once the project is put in service.

In most cases, the value of ITC depends on when the project was launched and other factors. Therefore, you can elect to claim ITC instead of PTC.

The IRA offers the ITC for up to 30% of the equipment’s cost for projects launched by December 31, 2024. However, this is subject to the prevailing wage and apprenticeship requirements.

Advanced Manufacturing Tax Credits

Companies that domestically manufacture and sell clean energy equipment in the United States are eligible for new advanced manufacturing production credits. The equipment must be manufactured and sold between December 31, 2022, and Dec. 31, 2032.

The credit amount varies for wind turbines based on the type of component. The amount is multiplied by the turbine’s rated capacity in watts, as below:

  • Nacelle: 5 cents multiplied by the rated capacity.
  • Blades: 2 cents multiplied by the rated capacity.
  • Fixed-bottom offshore wind energy platform: 2 cents multiplied by the rated capacity.
  • Tower: 3 cents multiplied by the rated capacity.
  • Distributed wind inverters: 11 cents multiplied by the rated capacity.
  • Floating offshore wind energy platform: 4 cents multiplied by the rated capacity. 

How To Apply for Small Wind Turbine Tax Credits for Residential

You’ll need to file Form 5695 and submit it along with your tax returns to the IRS.

As you can see from how the wind turbine and standalone battery tax credits are tiered, you can save the most on projects built between 2022 and 2032.

Can You Use Small Wind Turbine Tax Credits With Other Federal Energy Incentives?

In addition to the Residential Clean Energy Credit with the wind turbine tax rebate, another federal home energy incentive is the Energy Efficient Home Improvement Credit. This credit helps you to offset the cost of home energy efficiency upgrades.

You can claim 30 percent on the cost of most upgrade items, including purchase and installation, up to $1,200.

For some upgrades, like installing a more efficient heat pump, the credit amount allowed is up to $2,000.

Nothing stops you from taking advantage of the small wind turbine tax break and the Energy Efficient Home Improvement Credit.

When Does the Small Wind Turbine Tax Credit Expire?

The residential wind power turbine tax credit will expire on December 31, 2034.

The Inflation Reduction Act changed the rebate rate and extended the credit’s expiration from the previous date of December 31, 2023.

Final Thoughts – Small Wind Turbine Tax Credits You Can Apply For

You can use small wind turbine tax credits to reduce your home’s carbon footprint and save on utility bills.

The standalone energy storage credit provides an additional cost-saving opportunity in transitioning your home to clean energy.

In addition to federal energy credits, there may be additional energy incentive opportunities at the local level. You can contact your state energy office to ask about such options!

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