Solar Tax Credit

Solar Tax Credit Is Stepping Down in 2020

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Rooftop Solar Panels

Designed & Installed by LighthousSolar

What Is the Solar Investment Tax Credit (ITC)? 

The solar Investment Tax Credit is one of the most important federal policies to support the expansion of solar energy in the United States. The ITC is a 30% tax credit for the solar system installed on residential, commercial, and large-scale utility solar farms which enables you to deduct 30% of the cost of solar installation from your federal tax liability and there is NO cap for that!

The most important benefit of the solar tax credit is to provide financial support for customers and make the process of shifting toward a solar power system more affordable, as well as providing market assurance for companies to develop long-term investments that drive competition and technological innovation, which result in lower energy costs for consumers.

How the Solar Tax Incentive Works? 

The most important consideration to be eligible for the solar tax credit is that you own your solar energy system. Either as a business owner or homeowner you can claim your tax credit directly. If you don’t have enough tax liability to claim your whole tax credit in the first year, don’t worry, you can rollover the remaining credits across the next 5 years. 

On average, American households use 11,000 kWh electricity per year and to offset all of that electricity use, we would recommend an 8 kW solar system. If installed by LighthouseSolar, this would cost you an estimated $20,000 (before tax credits and rebates) which makes you eligible to receive $6,000 solar tax credit. The net investment, without considering any local rebates, is thus $14,000.                                                                               

How Long will the Solar Tax Credit be in effect?

There has been a much debate on the expansion of solar tax credit. Congress passed a bill in 2015 and the tax credit is now available to homeowners and commercial sectors with different rates through 2021.

However, the full 30% tax credit WILL NOT be available after 2019 and will drop by 4% as of January 2020. The tax credit will thus begin a slow rampdown through 2022 as follows: 

2019: The tax credit remains at 30% of the cost of the system. This means that if you get your system before the end of 2019, you will have the opportunity to get 30% tax credit for your solar panel system.

2020: Owners of a new residential and commercial solar power system can only deduct 26% of the cost of the system from their taxes.

2021: Owners of a new residential and commercial solar system will be able to deduct 22% of the cost of the solar power system from their taxes.

2022 onwards: Only owners of a new Commercial solar PV system can deduct 10% of the cost of the system from their taxes. There is No Federal Tax Credit for Residential solar energy systems.

In summary, the solar Investment Tax Credit is applied to your solar power system cost and the amount you receive varies based on the solar system size you choose. A simple example of the differences in the solar tax credit in 2019-2022 for a 13-kW solar system size is shown below:

Changes in your savings as Solar Tax Credit changes in 2019-2022 

Year

Total Solar Cost before Tax & Rebates

Tax Credit

Credit Amount You Receive

Tax Deductible

% Change

2019

$28,448

30%

$ 8,534 

 

N/A

2020

$28,448

26%

$7,396

($1,137)

-13%

2021

$28,448

22%

$6,258

($1,137)

-15%

2022 onwards

$28,448

10%

$2,844

($3,413)

-55%

 

* No Tax Credit for Residential Sector by 2022 onward.

In 2020, the Tax Credit will drop 4%, which means you will earn $1,130 less than the previous year in terms of tax credit. So, if you are interested in going solar and have been waiting for the right time, you should act now to enlarge your savings.

LighthouseSolar Hints:

  1. Battery storage systems are also eligible for 30% solar tax credit when the battery system is charged at least 90% by a renewable energy source (solar) and is installed at the same time.

  2. It is important to understand your solar investment. To the extent that getting multiple quotes helps you understand the value and specifics of solar, we encourage you to pursue your options.

  3. Demand of your solar provider the level of experience and service proportionate to your investment. Solar has a claim on permanence that many other investments around your home cannot compete with. We recommend relying on the experience of your friends and peers as trusted sources of information and validation. The solar installation is an investment and you would like to have a company that supports you and provides great services when you need it.

  4. Working with local companies has many values. There is a community and economic value to supporting your local economy, but more importantly, your solar system will need support and or a tune up at some point in its life and it is very important to work with a company that is of this place. Based here, operates here - today and in the future.  

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Residential Solar System

If you’re interested in figuring out the value proposition that solar can offer, we provide Free Consulting. The LighthouseSolar professional sales team will be happy to answer any questions you might have.


- Nafi Shah

Communication Specialist

LighthouseSolar

Essence of Solar Financing

I have had a lot of conversations about how solar financing works and how it varies from traditional financing.  Solar financing can seem a bit strange and unfamiliar so I decided to jot down some facts and hopefully explain some of the basics.

No money out of pocket

Every single loan product we offer for solar system is NO MONEY DOWN.  This means no upfront costs or fees. Essentially you can transition from paying the utility to rent your energy to owning your energy without spending a penny!

Flexible to Meet your Needs

Solar financing is available in many terms making it easy to tailor the loan to the project and/ or the clients particular budget goal.  Our lenders offer 10, 12, 15, and 20 year terms. All solar loans are simple interest and have no pre-payment penalties.

Caters to Federal Solar Tax Credit

This is the meat and potatoes of solar financing and what makes it different from traditional loans. When you purchase a solar system, you can receive a 30% refund of the system’s cost on your next federal income tax return.  Solar financing takes this incentive into consideration in the payment schedule.

When you finance your system the loan is set up to give you up to 18 months to file your taxes and apply the 30% Solar Tax Incentive to the loan.  The finance contract will include 3 different payment amounts. The first payment is an interest-only payment for the period of time (up to 18 months) in between installation completion and when you file your taxes for that year. The second is the payment amount before the incentive is paid to the lender and the third reflects what the payment will be after the 30% has been paid.  This allows you to have enough time to file your taxes and forward the payment to the lender.

Payment of the 30% federal tax incentive is not required by the lender, nor is there any penalty if it is never paid.  You simply would have a higher payment based on the principal loan amount being 30% higher. It is worth mentioning that close to half of people who finance their solar systems never pay in the incentive.  Some use the 30% tax incentive to pay down other higher interest loans or credit cards. Others might take a well-earned vacation or make a larger purchase that may have otherwise been impossible. It is a good example of how solar has hidden benefits beyond the obvious energy cost savings.

To sum it up, there is a financing option for everyone and we cater to each client individually and offer options in a consultative manner.

-Erik Smith

Technical Sales

LighthouseSolar