Photovoltaic and solar thermal systems each carry a separate 30% federal tax credit capped at $2,000 for residential installs. A federal tax credit is a dollar for dollar reduction on owed taxes. If you were to install a $7,000 hot water system you would maximize the tax credit. This would result in a $2,000 decrease in owed taxes. State specific incentives vary greatly. Currently, TVA offers a $0.15kWh incentive for residential renewable systems in areas served by TVA power distributors. In Kentucky these electric companies include: Hickman-Fulton Counties RECC, Pennyrile RECC, Tri-County REMC, Warren RECC, and West Kentucky RECC. TVA service area also includes large portion of Tennessee and some portions of Virginia. A list of current incentives can be found at: http://www.dsireusa.org/