If you’re thinking about investing in solar, do it now. After 2019, federal tax credits begin to phase out and you could be leaving thousands of dollars on the table.
Currently, the Federal Investment Tax Credit (ITC) offers 30 percent of your residential solar project costs back to you in the form of a tax rebate. But starting next year this rebate is expected to be stepped down to 26 percent, then to 22 percent in 2021. Now, the ITC can apply to both residential and commercial solar projects. In 2023 the residential tax credit will go away, and the commercial tax credit will stay at 10 percent.
“It was slated to go away in 2016, and it was extended,” said Ryan McCune from Renovus Solar. “That was a big reason why the solar market in 2016 was pretty crazy because everyone tried to jump on because the next year every solar project became 30 percent more expensive. Realizing how much growth was happening in the renewable energy industry, the powers that be in politics decided that it was smarter to do a phased step-down approach to allow companies to really adjust their pricing models and figure it out.”
For residential projects, the system must be purchased in 2019 in order for the taxpayer to be eligible for the credit. For commercial systems, there is a continuation clause that allows the purchaser to get the tax credit locked into whatever year they purchase the system. Then, they have one year to build the system.
It’s important to note, the credits are only for people investing in solar by purchasing a system. For customers investing through a community solar project, the tax credits do not apply.
The credits are important tools to help new and fledgling industries continue to grow. Here in the United States, the credits have largely been a success and both solar and wind industries have grown significantly. Since 2016, the cost of solar has come down significantly.
“That means that this year solar is cheaper than it’s ever been,” McCune said. But now it’s time for solar to start standing on its own and the ITC will be phased out.
Thankfully, the New York State solar tax credit, which can give a customer up to 25 percent of their system costs back, up to $5,000, likely isn’t going anywhere anytime soon.
Is solar for you?Not everyone, and not every project, will be able to take advantage of these tax credits so local solar companies, like Renovus, highly recommend that customers speak with their accountant about what is available to them if they are considering investing in solar.
“None of this stuff is guaranteed to anybody,” McCune said. “Because we don’t know what anybody’s income looks like, we don’t know what type of deductions they’re taking. The best we can do is put numbers in front of people and say ‘Hey, you have access to all of this stuff, but you need to talk to your tax advisor to find out if you can actually get all of it.’”
The ITC can be spread out over up to 20 years. If the credit was for $20,000, the taxpayer could take $1,000 credit every year for 20 years. But McCune said that’s not what Renovus would typically recommend that customers do. “We recommend taking it all as quickly as you can and then using it to pay down the solar loan you take out,” McCune said.
He wants to make it clear that solar companies know solar, not tax credits. They are happy to speak to a customer’s accountant or banker, but the financing and tax incentive options are best explained by those who know them best. During tax season, McCune said Renovus is happy to provide customers with the necessary tax documents and even help them fill out whatever information they can provide about the project.
While 2019 might be your best year to invest in solar, there are other aspects that people should consider, and consider soon. Because solar is becoming more affordable, more people are buying it. The process of purchasing to installing has a number of hoops to jump through that potential customers might want to think about. Before giving a potential customer an estimate, Rebekah Carpenter from Finger Lakes Renewables (FLR), said FLR first does an inspection of the residence to see if there are any other changes the homeowner could make to lower their energy bill before jumping into solar. “We can give estimates prior to site visits but we really like to be on site and check all of the particulars of the house to make sure that we give the best pricing,” she said. “Some might be simple installs and some might be more complicated installs so we really personalize based on what each system looks like, for both ground mount and roof mount systems.”
After deciding to buy a system, FLR will put in the paperwork to NYSERDA to start the process of getting it approved. While NYSERDA takes between two to six weeks to approve a system FLR can start talking to the customer about financing and get the utility contract set up.
FLR does not ask customers to pay for the system until it is ready to install the bulk of the system, so starting early so that the purchase is made this year is important. Installing the system once all the paperwork is done doesn’t take too long, but residents will likely need to get permit approval from their local municipalities and that is a process that can take longer than expected. “Most of the towns in Tompkins County now are fantastic about getting permitting through,” Carpenter said. “The town boards are really paying a lot of attention and starting to write up laws about solar. So, solar on yards, solar on roofs, so that everyone has a good lead on what’s going to be allowed and what’s not, where you can put it and where you can’t, so generally there’s not any issues with zoning it’s just a really simple building permit. But we do want to give the towns enough time because they get really busy this time of year.”
If you’ve been considering solar, now is the time.
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