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Empowering Western NC and Upstate SC with Solar Since 1995

Financial Incentives for Solar Energy

A variety of financial incentives for renewable energy are available to help make an investment in solar energy more affordable for both homeowners and businesses, and to accelerate the adoption of clean energy technologies. These range from the federal tax credit to production incentives offered by utilities and are often the result of legislative policies, and therefore vary from state to state.

We keep up-to-date with current incentive programs for clean energy investments and generation, and assist our customers in identifying any and all that they may benefit from. Below you’ll find Federal incentives and links to state-level incentives as well.

FEDERAL INCENTIVES:

Residential Renewable Energy Tax Credit

  • 26% tax credit with no maximum
  • Applies to solar thermal, solar electric and wind energy systems
  • System must serve a dwelling used as a residence by the taxpayer
  • Excess credit can be carried to the next tax year
  • Drops to 22% after 12/31/2022

Business Energy Investment Tax Credit

  • 26% tax credit with no maximum
  • Applies to solar thermal, solar electric and wind energy systems
  • Available to commercial, industrial, and agricultural businesses
  • Excess credit can be carried to the next tax year
  • Drops to 22% after 12/31/2022

Modified Accelerated Cost-Recovery System (MACRS)

  • Businesses may recover investments through depreciation deductions
  • Applies to solar thermal, solar electric, and wind energy systems
  • Classified as a five-year property

(The following is from the Database of State Incentives for Renewables & Efficiency ®, an excellent resource for detailed information on renewable energy incentives.)

Database of State Incentives for Renewables & Efficiency®

Note: The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023.

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property. Such property currently includes*:

  • a variety of solar-electric and solar-thermal technologies
  • fuel cells and microturbines
  • geothermal electric
  • direct-use geothermal and geothermal heat pumps
  • small wind (100 kW or less)
  • combined heat and power (CHP)
  • the provision which defines ITC technologies as eligible also adds the general term “wind” as an eligible technology, extending the five-year schedule to large wind facilities as well.

Bonus Depreciation
Bonus Depreciation has been sporadically available at different levels during different years. Most recently, The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023.

For more information on the federal MACRS, see IRS Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562. The IRS web site provides a search mechanism for forms and publications. Enter the relevant form, publication name or number, and click “GO” to receive the requested form or publication. For guidance on bonus depreciation, including information relating to the election to claim either 50% or 100% bonus depreciation, retroactive elections to claim 50% bonus depreciation for property placed in service during 2010, and eligible property, please see IRS Rev. Proc. 2011-26.

*Note that the definitions of eligible technologies included in this entry are somewhat simplified versions of those contained in tax code, which often contain additional caveats, restrictions, and modifications. Those interested in this incentive should review the relevant sections of the code in detail prior to making business decisions.

USDA Rural Energy for America Program (REAP)

  • Up to 25% of total eligible project costs in grants, $500,000 maximum
  • Up to 75% of total eligible project costs in loan guarantees
  • Applies to energy efficiency improvements and renewable energy systems
  • Available to agricultural producers and small businesses in eligible rural areas

(The following is from the Database of State Incentives for Renewables & Efficiency ®, an excellent resource for detailed information on renewable energy incentives.)

Database of State Incentives for Renewables & Efficiency®

The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses in America to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies that reduce energy consumption, and participate in energy audits and renewable energy development assistance.

Renewable energy projects for the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program include wind, solar, biomass and geothermal, and hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. These grants are limited to 25% of a proposed project’s cost, and a loan guarantee may not exceed $25 million. The combined amount of a grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost. In general, a minimum of 20% of the funds available for these incentives will be dedicated to grants of $20,000 or less. For more information on grant, loan guarantees, loan financing, and opportunities for combinations thereof, visit the USDA website.

Application due dates are published annually in the Notice of Funding Availability.

Eligibility
Grants and Guaranteed Loans are generally available to small businesses and agricultural producers and other entities as determined by USDA. To be eligible for REAP grants and guaranteed loans, applicants must demonstrate sufficient revenue to cover any operations and maintenance expense as well as any applicable debt service of the project for the duration of the guaranteed loan or grant. Rural small businesses must be located in rural areas, but agricultural producers may be located in non-rural areas.

Eligible project costs include purchasing energy efficiency improvements or a renewable energy system, energy audits or assessments, permitting and licensing fees, and business plans and retrofitting. For new construction the replacement of older equipment with more efficient equipment may be eligible as a project cost only when a new facility is planned to be more efficient and similarly sized than the older facility. Working capital and land acquisition are only eligible for loan guarantees.

For more information regarding applicant and project eligibility for loans and grants, visit the USDA REAP eligibility webpage, read the eligibility requirements in the most recent Solicitation of Applications for REAP funding in the Federal Registry, and/or contact your state rural energy coordinator.

STATE-LEVEL INCENTIVES:

These pages will identify state level and utility incentives that may be available to you:

We recommend the Database of State Incentives for Renewables & Efficiency as a comprehensive source of information on incentives and policies that support energy efficiency, as well as renewables, from the national to municipal level.

While we strive to inform our customers of financial incentives that make their investment in a clean energy system even more economically favorable, we also recommend that they consult a financial advisor. As the ability to claim tax credits is based on tax liability, this is especially advisable to ensure that the credits can be fully realized, and that an investment in solar energy is structured to the fullest economic advantage.

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