Tax Credits and Government Incentives for Solar (for Homeowners)

To promote the proliferation of renewable resources, governments and other bodies offer tax credits, rebates and financial incentives to encourage the expansion of investments in solar energy. These perks can only be claimed if you own the solar installation through solar cash purchase or solar loans, where the solar installation paperwork lists your name as the owner. Leasing a solar installation does not entitle ownership of the system. Here is a list of aids you can claim from the state and federal government for your solar installation, this should help in balancing out the enormity of the cost on a solar energy system:

Residential Renewable Energy Tax Credits (ITC)

The federal government gives solar tax credits to homeowners by cutting off nearly 30 % on the cost of a solar installation. This credit is called investment tax credit and will be accessible to homeowners until 2021, and can be claimed by residential and business properties. Solar tax credits can be claimed only when a homeowner owns the solar installation, such exemptions are not applicable for homeowners under power purchase agreements or solar leases. If you own a solar installation, remember to claim tax credits when you file taxes.

The Energy Policy Act was established in 2005, it mandated federal tax credits on a residential energy property to be applicable for solar-electric systems, solar water heating systems and fuel cells. The act expanded to include Small wind-energy and Geothermal heat pumps but these were dropped in 2016, along with fuel cells. Consolidated Appropriations Act ensured that tax credits are applicable for solar-electric systems and solar water heating systems at 30% on the combined value of the solar system, but after 2019 the credit reduces drastically until it ends in 2021. When the tax credit surpasses tax liability, the surplus amount is taken over to the next year.

 If you are a homeowner willing to invest in a solar installation that costs $30,000, when the investment tax credit is applied to the final cost of the installation, you can receive a federal tax exception of 30% amounting to $9000. There are many more rebates for homeowners investing in renewable resources, but these plans differ from state to state.

In order to begin the process to apply for the investment tax credit, collect all your paper work associated with the purchase and installation of your solar panel. Homeowners can only claim ownership of the solar installation, if the installation is fully installed and functional. In addition, if you lease the system, the solar installer will get the tax credit, since the solar company is the legitimate owner of the system. Consequently, the homeowner with a leased solar installation will not be eligible to claim incentives and rebates provided by individual states or special bodies. If you are a homeowner with more than one property, and you have just installed solar in one of your properties, you can claim investment tax credits if you can prove that you live in that residence for a certain period in a year.

IRS Form 5695 should be filled to avail investment tax credits on your investment into renewable energy through your solar installation. The residential energy credits section should include all details pertaining to your installation. Form 5695 should include the total cost of your solar energy installation after rebates and local incentives, all additional costs to the installation should also be entered. Homeowners should also calculate the 30% deduction into the overall costs, and state if they have tax liability to claim the entire amount or indicate carry overs to the next year. In case, you claim tax credits on other expenses that are not related to renewable energy, these have to be listed in the form. In form 1040, include details on your solar energy credit and subsequent calculations.

State Tax Credits

 

While investment tax credits are offered by the federal government, state tax credits are offered by individual states and can be bundled with investment tax credits. This should be stated explicitly while filling your tax forms for the financial year. The amount of the state tax credits differs from state to state, but it should help bring down the overall amount on a solar energy installation. To find out tax credit plans and other government plans that support energy efficiency through renewable energy by adopting solar power, visit https://energy.gov/savings to find out rebates and savings available to homeowners.

Cash Rebates

Cash rebates are offered by individual states, solar companies, municipality and non profit organizations that endorse renewable energy. Such rebates can reduce the cost of a solar energy system upto 20%, the only underside to rebates is its availability to a small number of homeowners, since it is not open to every applicant.

Solar Renewable Energy Certificates (SREC)

Several states have laws that require the generation of energy from renewable resources, this mandates that an adequate amount of energy should be created from solar energy. Such states offer, solar renewable energy certificates to homeowners, on all energy that was created through their solar energy installations. These certificates can be sold to make a profit, and in such circumstances, even if the solar installation was purchased on a lease, the homeowner can still earn large amounts of money through solar renewable energy certificates.

Performance-Based Incentives (PBI)

There are states that offer credits on every kilowatt of electricity that a solar energy installation creates, these are often monitored through specialized meters. This is a big boost in the promotion of solar power.

Subsidized Loans

In order to finance your solar energy installation, you can avail subsidized loans from your bank, solar company and other organizations for low rates of interest. Banks offer solar loans for the sole purpose of helping homeowners purchase solar energy installations, such loans allow for monthly repayment plans, these rates differ from state to state.

Home Tax Exemptions

Certain states have tax exemption policies towards homes with solar installations, where the value of the installation is not calculated with the overall valuation of the house. This prevents property tax from raising in a home with solar installations.

Other Incentives

The Database of State Incentives for Renewables & Efficiency (DSIRE) at http://www.dsireusa.org holds detailed information on rebates, incentives and tax credits offered by the federal government and different states.