North Carolina Solar Tax Credit: How to Qualify and Apply

North Carolina Solar Tax Credit: Your Complete Guide to Solar Savings

Investing in solar energy in North Carolina offers significant financial benefits beyond lower utility bills. While the state-specific solar tax credit expired in 2016, numerous incentives remain available to make your renewable energy investment more affordable. At Sundance Power Systems, we’ve helped Western North Carolina residents navigate these incentives since 1995, maximizing returns on their solar investments while contributing to a sustainable future. Additionally, many solar financing options in North Carolina are designed to fit various budgets and financial situations, making it easier for homeowners to adopt solar technology. By leveraging these financing solutions, individuals can minimize upfront costs and enjoy immediate savings on their energy bills. Embracing solar energy not only enhances personal finances but also supports the state’s commitment to renewable energy and environmental stewardship.

Understanding the current landscape of solar incentives can be challenging. This guide breaks down the available tax credits, eligibility requirements, and application processes to help you capture every dollar of savings your solar installation qualifies for.

Available Solar Tax Incentives for North Carolina Residents

While the state-specific North Carolina Solar Tax Credit expired on December 31, 2016, several valuable incentives remain accessible to homeowners and businesses installing solar systems: Homeowners can still take advantage of the federal Investment Tax Credit (ITC), which allows for a significant deduction on solar installation costs. Additionally, small business solar tax credits offer an excellent opportunity for local enterprises to invest in renewable energy while reducing their tax liabilities. With these programs in place, interest in solar energy continues to grow, making it a viable option for both residential and commercial properties.

Federal Solar Investment Tax Credit (ITC)

The federal solar tax credit remains the most substantial incentive available to North Carolina residents. Thanks to the Inflation Reduction Act of 2022, the credit has been extended and enhanced: Homeowners can now benefit from a higher percentage of their solar system costs being covered, which significantly lowers the upfront investment. Additionally, those considering solar energy should also explore the South Carolina solar tax credit details, as the neighboring state offers its own incentives that could make solar installations even more affordable. This combination of federal and state credits can dramatically enhance the financial viability of going solar.

For systems installed between 2022-2032, homeowners can claim 30% of their total solar system costs, including equipment, installation, and associated expenses. This credit directly reduces your federal tax liability dollar-for-dollar, providing substantial savings. If your tax liability is less than the credit amount in the installation year, you can carry forward the remaining credit to future tax years.

Property Tax Exemption

North Carolina offers an 80% property tax abatement for the assessed value of your solar energy system. This means that while your home’s value increases with solar installation, 80% of that increased value is exempt from property taxes, protecting you from higher tax bills while still enjoying the home value appreciation.

Net Metering Programs

While not a tax credit, North Carolina utilities offer net metering programs allowing solar system owners to receive credits for excess power generated and fed back to the grid. As pioneers who negotiated the first net metering agreement in North Carolina back in 1996, Sundance Power Systems can help you maximize these benefits through optimal system design.

Qualifying for Solar Tax Incentives

To qualify for these valuable incentives, several requirements must be met:

Federal ITC Eligibility

Your solar photovoltaic system must be installed on your primary or secondary residence within the United States. The system must be new or being used for the first time—the credit cannot be claimed for used equipment. You must own the solar system (not lease it), and the installation must be completed during the tax year for which you’re claiming the credit.

Property Tax Exemption Eligibility

The system must be installed on a property you own in North Carolina, and appropriate documentation of system value must be available for property assessment purposes.

How to Apply for Solar Tax Credits in North Carolina

The application process varies by incentive type:

Claiming the Federal ITC

Complete and file IRS Form 5695 (Residential Energy Credits) with your federal tax return. Calculate your credit on this form, then enter the result on your 1040 form. Maintain all documentation related to your solar purchase and installation, including contracts, invoices, and proof of payment, as supporting evidence for your claim. Additionally, you should check your state’s solar rebate program details, as these can provide additional financial incentives that may further reduce your overall costs. Ensure that you meet all eligibility requirements for both federal credits and state programs, as this can greatly enhance your savings. Keeping copies of all correspondence and documentation with state programs will also be beneficial when filing your taxes.

Property Tax Exemption

The exemption is generally applied automatically during property assessment, but we recommend confirming with your local tax assessor that your system has been properly documented and the exemption applied.

Take Action: Maximize Your Solar Savings

The financial benefits of going solar in North Carolina are substantial when you leverage available tax incentives. At Sundance Power Systems, we don’t just install solar—we partner with you throughout the entire process, including helping you understand and apply for all eligible incentives.

Our experienced team has been guiding Western North Carolina residents through the solar incentive landscape for over 30 years. We’ll ensure your system is designed to maximize available credits while delivering optimal energy production for decades of reliable, clean energy.