What’s happening with the tax credits?
What are the tax credits?
Believe it or not, the government is still promoting green energy in the form of federal and state tax credits… but not forever. As more and more people decide to rid themselves of the financial burden of rising electric bills, it seems as though the need to promote green energy is not as pressing as it once was. Inside the industry, we all thought the federal tax credit was all but gone in 2016, but an extension was issued with a reduction schedule starting in 2020 (see below).
The reduction schedule is as follows:
30% for systems placed in service by 12/31/2019
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
Please click the link below for a full description on the federal tax credit:
The New York State tax credit is part of the “REV 2030 Goal”, and even though there is no guarantee that it will continue each year, we haven’t heard or seen anything to tell us that it’s going away anytime soon. This plan is to have 50% of electricity used statewide produced by some form of renewable energy by the year 2030. Without an incentive of some kind, this goal will be much harder to achieve. This is why many of us believe that this tax credit will be here for at least the duration of this plan. Then again, anything is possible with a change in the administration, as we all know.
Please click the link below for a full description on the New York State tax credit:
Please click the link below for a full description REV 2030 Goal:
As far as the federal tax credit reduction is concerned, it seems like a long time, but it’s only a little over a year away before we start to see this incredible amount of money begin to diminish. These tax credits can offset almost half of the cost of a solar system for most residential customers, depending on how big or small of a solar system you would need. The federal tax credit is 30% of the total cost of a system with no cap and the New York State tax credit is 25% (for a primary residence) of the cost of the system with a $5,000 cap. They are “dollar for dollar” non-refundable income tax credits (not write-offs) and are based on your tax liability. In “Layman’s Terms”, they are limited to what you owed the government after all of your write-offs.
How can I take advantage of the tax credits?
The question isn’t usually whether you’re going to be able to take advantage of the credits, but how long will it take? We’ve found that a lot of our competitors say, “You’ll just get a check back at tax time.” That’s not necessarily true. Although most people can take advantage of these credits in one year, in some cases, it may take a couple of years to take advantage of them based on your specific scenario. Fortunately, the lenders in this industry have been designed to accommodate this and we have many programs in place to assist homeowners figure out how to manage this piece of the solar project. (There will be more details about finance options in my future posts.)
What does all of this mean?
As I mentioned earlier, more and more people are seeing the enormous long term benefits of going solar. These tax credits were initially put into place to promote the adoption of solar, and as this excellent source for Green Energy becomes more common, the need to promote it dwindles. The tax credits are diminishing very soon, so, there is no better time than now to get the most assistance from the government when purchasing a solar array!