President Obama's economic stimulus package, which is now law, includes a tax credit for solar and high efficiency hot water heaters. There was a law that allowed tax credits for energy-efficient home improvements but it ended in 2007. This credit applies to home improvements that were made to primary houses from January 1, 2009.

If you are thinking of installing a solar hot water heater in your home, you will be eligible for a tax credit of up to 30% with no limitation on the total amount. In the past the maximum tax credit was between 2 and 4 thousand dollars for solar water heaters, geothermal heat pumps and wind energy projects. In the current stimulus package, you can get a tax credit until 2016, but not for solar heaters in your pool or hot tub, just for those in your home.

Water heaters, like the tankless kinds, that are high efficiency are also eligible for a tax credit but in this case there is a cap. You can get up to $15000 for gas or electric water heaters that have at least a .82 Energy Factor (EF) ration or that are 90% thermal efficiency. The actual credit depends on what other energy efficient improvement you have made to your home and what ones you are claiming on your taxes.

The fact that the solar water heater tax credit has no cap and the other upgrades have a cap show how committed the Obama administration is to renewable energy. All Energy Star solar heaters are eligible for a tax credit. We are going to install one this summer for our home to work along side our tankless heater.