Residential Energy Tax Credit

Summary

Note: ODOE recently filed final rules to implement SB 1507 (2016), which places a limit of $1,500 for all tax credits that can be claimed in a year. SB 1507 is effective in June 2016. It is also considering input on calculating first-year energy savings for solar thermal systems. More information can be found here.

Homeowners and renters who pay Oregon income taxes are eligible for the Residential Energy Tax Credit (RETC) if they purchase qualified heating, efficiency, and renewable energy systems. Third-party owned systems are eligible for the tax credit, though specific requirements detailed in the administrative rules must be met, and third-party owners are limited in the number of credits they may apply for. Credits are eligible for pass-through to another entity who has purchased the credits at present value from the applicant, under specific rules issued by Oregon Department of Energy (ODOE). The amount of the tax credit is based upon the first year energy savings of the eligible alternative energy device. 

As of January 1, 2011, third-party owned systems are also eligible for credits. Credits may not exceed a resident's tax liability, but may be carried forward for up to five years. Systems installed prior to January 1, 2015 are also eligible for tax credits, but at the incentive rates in place at the time the system was installed (see RETC rules for details). 

Renewable Energy Incentives

Incentives are available for photovoltaic (PV) systems, solar space and water heating systems, fuel cells, spa and pool heating systems, ground source heat pumps, and wood and pellet stoves. Incentives are based on installed capacity or kWh savings for these technologies. Wind turbines also are eligible for incentives based on actual system production. The maximum incentive for PV systems, fuel cells, and wind turbines is the lesser of $6,000 (over four years) or 50% of the net costs, which are calculated after any state incentives. Residents with unused PV credits may carry the credits forward for five years. Solar hot water heaters receive credits equal to the lower of either 50% of the cost of the device or $2 per kilowatt hours (kWh) produced in the first year, with a maximum incentive of $6,000 (or $1,500 a year).

Alternative fuel devices include facilities for mixing, storing, compressing, or dispensing fuels and equipment used to recharge or refuel alternative fuel vehicles. They are eligible for a 25% tax credit, not to exceed $750. Eligible fuels include electricity, natural gas, ethanol, methanol, propane, or other approved fuels.

Energy Efficiency Incentives

Only technologies recognized as premium efficiency by the Oregon Department of Energy are eligible for the tax credit. The Oregon Department of Energy (ODOE) maintains a list of qualifying technologies. The tax credit is $0.60 per first-year energy savings in kWh up to $1,500.

Heat pump water heaters must the Northern Climate specification established by the Northwest Energy Efficiency Alliance in order to qualify for the tax credit.

History
Previously, this credit was scheduled to expire in 2012, but HB 3672 (2011) extended the expiration date of the tax credit to January 1, 2018, with the exception of the alternative fuels vehicle portion of the tax credit, which ended as scheduled January 1, 2012. Previously, the RETC offered incentives for appliances such as dishwashers, clothes washers, refrigerators, plus air conditioners and boilers.  However, HB 3672 excluded these technologies as of January 1, 2012. Though eligibility for alternative fuel vehicles expired January 1, 2012, alternative vehicle infrastructure projects, including fueling or charging devices, are eligible as of January 1, 2012. 

ODOE has modified additional aspects of the RETC rules since then, often to implement legislation changing eligible technologies and incentive amounts. More information about past rulemaking activity is available on ODOE's website.