June 2018 | RayWell Solar
For the first time in a history of powering their homes, Americans can reduce their energy cost by going solar and save thousands of dollars. Thanks to Uncle Sam and available tax incentives, going solar is the most affordable it has ever been.
Solar Tax Credits 101
Anyone in the United States that purchases a solar system can get 30% of the total cost back in tax credits. As of now, the 30% tax incentive will remain in effect through December 31, 2019. After that, it will drop down to 26% for 2020, 22% for 2021, and finally zero after 2023. And if you live in South Carolina, you could also be eligible for an additional 25% tax incentive, which means you can get up to 55% of the total cost of the system back.
The tax credits are meant to offset any expense related to the installation of solar. That includes the materials, installation labor and even some small adders if they are an essential part of the system. The total amount quoted by a solar company is eligible for the state and federal tax incentives concurrently.
These incentives are dollar-for-dollar credits reducing the total liability of a person’s or business’ income taxes. In order for you take advantage of these credits you must have tax liability. Your liability is the total amount you owe the government in any given year. This “bill” can be paid by withholding each paycheck (W2) or might be owed only when filing for taxes in April. If the solar credit is larger than the total “bill” then the difference is carried over to the following year.
Will I Get a Rebate Check?
This is the most common question we get here at RayWell. While individual tax advice is recommended from a CPA, the best way to describe is like this: if you typically withhold each paycheck, you typically receive a rebate check. The solar credit wipes out a bunch of what you already paid and it will increase the amount of the refund. This scenario is what makes installing solar with no-cost-up-front so appealing.
If you typically write a check to the government at the end of the year and include it with your tax return, you should be saving to make that large payment. In this case, the solar credit can pay a portion of your bill for you and the money you saved doesn’t have to go towards taxes. Either way you look at it, if you owe money to the government, it is reduced dollar-for-dollar by a solar tax credit.
South Carolina Solar Tax Credit
The state tax credit works like the federal, with one major difference. South Carolina caps the credit at $35,000 and only $3,500 can be claimed per taxable year, if you don’t pay enough in taxes to get the full value of the credit in one year, it carries over for up to 10 years.
For incentives specific to your area, check out: www.dsireusa.org.
Using Solar Tax Credits with Financing
The total cost of the system to be paid to get solar installed is over double the cost it turns out to be for the customer. Yet so many people across the Carolinas are getting solar for no money up front. This is because there are innovative solar financing models that allow you to take your tax credits and pay them in one lump sum into the loan and reduce the monthly payment. One national lender is Dividend Solar. We recommend looking at their 20 year loan with the opportunity to re-amortize and reduce the monthly payment. The result is a lower solar payment than your old utility payment as soon as you install.
What many are realizing is that the tax credits are only available for a few more years. While the cost of solar panels has dropped dramatically, it is flattening out. It’s best to act soon before the incentives go away and the net price of solar increases. If you are interested in an estimate, please contact us below.