SOLAR 101 FINANCIAL INCENTIVES
Solar Electric Power Generator Systems
Financial Incentives for Home or Business
The best guaranteed investment you’ll ever make.
Financial Incentives for Home or Business
The best guaranteed investment you’ll ever make.
1) 30% Investment Tax Credit - Thirty percent of the entire system cost is a Federal Income Tax Credit. You can use this tax credit instead of paying cash to IRS for tax due now or in the future.
2) Renewable Energy Credits - One renewable energy credit is earned for every 1000 kWh produced by the solar energy made by the solar electric system. Even though your home or business will use all the solar power made, you'll still get paid for every kWh of solar energy made. Energy credit income is tax free! Values can vary and are sold at special auctions. Superior Solar Design aids in registering and selling customer SREC's.
3) Net Metering - During the daylight hours a solar electric system can sometimes over produce electric. Your electric meter will literally spin backwards and export extra electric back to the grid earning the customer kWh credits. During the daylight hours a solar electric system can sometimes overproduce electric. Unused power is then sent back to the grid, earning the customer credits. Export kWh credits are applied to billing and used to offset evening hour kWh usage.
4) Philadelphia Energy Authority, Solarize Philly Rebates - Superior Solar Design is an authorized Philadelphia Energy Authority, Solarize Philly Installation Partner. This incentive is only offered to Philadelphia homes and businesses. The Philadelphia Energy Authority is offering rebates for installed qualified residential solar electric systems at $.20 per KW. Installed qualified commercial solar electric systems rebates are $.10 per KW.
5) Modified Accelerated Cost Reduction (M.A.C.R.'s Accelerated Depreciation) - The modified accelerated cost reduction incentive is limited to commercial tax paying entities. The commercial entity may choose between best options depending on their tax appetite.
Over time a solar electric system will produce energy at about 50% of the cost of present and future utility company power. The ROI is an incredible 42% and it’s a guaranteed investment because the sun shines everyday. The stock market is dismal, risky, and volatile. Most CD rates are just 1%. There has never been a better time to get solar powered!
2) Renewable Energy Credits - One renewable energy credit is earned for every 1000 kWh produced by the solar energy made by the solar electric system. Even though your home or business will use all the solar power made, you'll still get paid for every kWh of solar energy made. Energy credit income is tax free! Values can vary and are sold at special auctions. Superior Solar Design aids in registering and selling customer SREC's.
3) Net Metering - During the daylight hours a solar electric system can sometimes over produce electric. Your electric meter will literally spin backwards and export extra electric back to the grid earning the customer kWh credits. During the daylight hours a solar electric system can sometimes overproduce electric. Unused power is then sent back to the grid, earning the customer credits. Export kWh credits are applied to billing and used to offset evening hour kWh usage.
4) Philadelphia Energy Authority, Solarize Philly Rebates - Superior Solar Design is an authorized Philadelphia Energy Authority, Solarize Philly Installation Partner. This incentive is only offered to Philadelphia homes and businesses. The Philadelphia Energy Authority is offering rebates for installed qualified residential solar electric systems at $.20 per KW. Installed qualified commercial solar electric systems rebates are $.10 per KW.
5) Modified Accelerated Cost Reduction (M.A.C.R.'s Accelerated Depreciation) - The modified accelerated cost reduction incentive is limited to commercial tax paying entities. The commercial entity may choose between best options depending on their tax appetite.
Over time a solar electric system will produce energy at about 50% of the cost of present and future utility company power. The ROI is an incredible 42% and it’s a guaranteed investment because the sun shines everyday. The stock market is dismal, risky, and volatile. Most CD rates are just 1%. There has never been a better time to get solar powered!
How the Federal Tax Credit Works for Solar Owners
When most consumers set out to do research about solar panels, they will eventually come across the Residential Renewable Energy Tax Credit also known as the Federal Investment Tax Credit (ITC). This tax credit allows you to claim up to 30% of the price you pay to install solar panels, which discounts the cost going solar significantly. The credit has no limit and will be available for another few years.
Admittedly, the solar tax incentive is confusing, and many of our customers have questions about it. While Superior Solar Design LLC is not licensed to give tax advice, and we recommend that you consult with a tax professional on all tax matters, we hope that by explaining the basics of the solar tax credit you will have a better understanding of how it will work for you when you are ready to purchase a solar system.
Many people are led to believe that they will receive a check from the federal government after they file their taxes, similar to how typical rebate works when purchasing a product. However, this is not true! The tax incentive is a credit, meaning that when you file your Federal taxes you can claim 30% of the qualified expenditures of your solar system. If you owe Federal taxes that year, then the credit can be applied and you will either A) owe less, B) owe nothing, C) owe nothing and have a credit left over.
Let’s look at these situations in greater detail. To guide our sample scenarios, we’ll imagine that Joe Solar paid a total of $25,000 for the installation of his solar electric system on his home’s rooftop. This amount qualifies him for a $7,500 Federal tax credit.
In Scenario A (where he would owe less) April arrives, he files his taxes and claims the 30% solar tax credit. It turns out he owes $10,000 in taxes, so the entire $7,500 is applied and he writes check to Uncle Sam for the remaining $2,500 that he owes.
For Scenario B (where he would owe nothing) Joe went to his employer and told him that he would be getting a $7,500 tax credit for the year. The employer adjusted Joe’s withholding's on his pay check so that he took home more money and would owe $7,500 to the IRS in April. In April, Joe applies the $7,500 tax credit to his $7,500 tax bill and owes nothing.
For Scenario C (where he would owe nothing and have a leftover credit), we find out that Joe only owes $1,200 in taxes. His tax credit covers this $1,200 amount that he owes and then the remaining $6,300 tax credit will roll over to any succeeding taxable years through 2016. It may be possible to roll any remaining tax credit past 2016, but it’s not entirely clear as reported by DSIRE (Database of State Incentives for Renewable Efficiency).
While most people qualify for the solar tax incentive, there are some that do not qualify. Anyone who does not owe taxes will not be able to benefit from the tax credit. Also, it does not apply for solar installations on rental properties. That said, anyone who installs solar panels on an existing home, new construction or second residence will be able to utilize the solar tax credit.
While you’re in the process of purchasing a solar system, Superior Solar Design suggests you consult your accountant or tax professional to figure out the specifics on how to approach the solar tax credit in your specific situation. While we are definitely experts in all things solar, we can’t necessarily claim the same with filing taxes.
If you are interested in a solar installation for your residence or business and would like to see how much you can save with the federal solar tax incentive, contact us at (610) 456-7069 or ddavis@SuperiorSolarDesign.com.
Admittedly, the solar tax incentive is confusing, and many of our customers have questions about it. While Superior Solar Design LLC is not licensed to give tax advice, and we recommend that you consult with a tax professional on all tax matters, we hope that by explaining the basics of the solar tax credit you will have a better understanding of how it will work for you when you are ready to purchase a solar system.
Many people are led to believe that they will receive a check from the federal government after they file their taxes, similar to how typical rebate works when purchasing a product. However, this is not true! The tax incentive is a credit, meaning that when you file your Federal taxes you can claim 30% of the qualified expenditures of your solar system. If you owe Federal taxes that year, then the credit can be applied and you will either A) owe less, B) owe nothing, C) owe nothing and have a credit left over.
Let’s look at these situations in greater detail. To guide our sample scenarios, we’ll imagine that Joe Solar paid a total of $25,000 for the installation of his solar electric system on his home’s rooftop. This amount qualifies him for a $7,500 Federal tax credit.
In Scenario A (where he would owe less) April arrives, he files his taxes and claims the 30% solar tax credit. It turns out he owes $10,000 in taxes, so the entire $7,500 is applied and he writes check to Uncle Sam for the remaining $2,500 that he owes.
For Scenario B (where he would owe nothing) Joe went to his employer and told him that he would be getting a $7,500 tax credit for the year. The employer adjusted Joe’s withholding's on his pay check so that he took home more money and would owe $7,500 to the IRS in April. In April, Joe applies the $7,500 tax credit to his $7,500 tax bill and owes nothing.
For Scenario C (where he would owe nothing and have a leftover credit), we find out that Joe only owes $1,200 in taxes. His tax credit covers this $1,200 amount that he owes and then the remaining $6,300 tax credit will roll over to any succeeding taxable years through 2016. It may be possible to roll any remaining tax credit past 2016, but it’s not entirely clear as reported by DSIRE (Database of State Incentives for Renewable Efficiency).
While most people qualify for the solar tax incentive, there are some that do not qualify. Anyone who does not owe taxes will not be able to benefit from the tax credit. Also, it does not apply for solar installations on rental properties. That said, anyone who installs solar panels on an existing home, new construction or second residence will be able to utilize the solar tax credit.
While you’re in the process of purchasing a solar system, Superior Solar Design suggests you consult your accountant or tax professional to figure out the specifics on how to approach the solar tax credit in your specific situation. While we are definitely experts in all things solar, we can’t necessarily claim the same with filing taxes.
If you are interested in a solar installation for your residence or business and would like to see how much you can save with the federal solar tax incentive, contact us at (610) 456-7069 or ddavis@SuperiorSolarDesign.com.
NEW JERSEY SOLAR ENERGY PURCHASE PLAN
The state of New Jersey solar electric program is one of the best in the nation. Besides a 30% ITC (Income Tax Credit) and Net Metering, there is a robust Renewable Portfolio Standard. The annually increasing RPS quota is currently in place until 2028 and has continued to create strong SREC (Solar Renewable Energy Certificate) market prices. It makes great financial sense and literally pays to own a solar electric system. Do not enter into a power purchase agreement or solar lease. By doing so you'll lose out on all of the incentives. Those companies offering the programs are doing so for a very good reason. Financial gain at your expense. Here's the how and why to buy:
- Owning or financing a solar electric system enables the system owner to lock in lower fixed energy rates.
- A loan payment is typically less than a present electric bill and doesn't increase.
- The loan payment is then offset by the sale of SREC's (Solar Renewable Energy Certificate).
- Cash from sale of the SREC's (Solar Renewable Energy Certificate) exceeds the cost of the system loan payment and will create a continuing positive cash flow.
"I'd put my money on the sun and solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that." - Thomas Edison, 1931
“Paying the most doesn’t always mean you’re getting the best, but paying the least always means you’re getting the worst.” - Douglas Davis, 1999