June 22 2018 0Comment

The Federal Solar Tax Credits Won’t Last Forever

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The Federal Solar Tax Credits Won’t Last Forever
By Ralph Ahlgren, Chief Technical Officer and President of Soleeva Energy
April 10, 2018
Good news, but with a sense of urgency; the maximum federal solar Investment Tax Credit (ITC) deductible from homeowner’s federal tax returns will be decreasing year over year beginning 2020 and phasing out entirely by December 2021.

The Bipartisan Budget Act of 2018, signed in February 2018, reinstated the Residential Renewable Energy Tax credit for solar-electric, solar-thermal, and other renewable energy technologies. Please note that the tax credit for all technologies now features a gradual step down in the credit value.

Tax credits will remain at 30% of the qualified expenditures (through December 31, 2019) for a home that is owned and used by the residence by the taxpayer for qualified equipment, including labor, original system installation and piping and wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding tax year.

The maximum allowable credit will decline over time, equipment requirements and other details vary by technology, as outlined below:

Solar-electric property

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
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating property

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
There is no maximum credit for systems placed in service after 2008.
Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
At least half the energy used to heat the dwelling’s water must be from solar for the solar water-heating property expenditures to be eligible.
The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
The home served by the system does not have to be the taxpayer’s principal residence.

Energy Storage

The federal tax code does not explicitly reference energy storage, so stand-alone energy storage systems do not qualify for the tax credit. However, the IRS issued Private Letter Rulings in 2013 and 2018, which address energy storage paired with PV systems.

In both cases, the IRS ruled that the energy storage equipment when paired with PV met the statutory definition of a “qualified solar electric property expenditure,” as was eligible for the tax credit.

It is important to note that Private Letter Rulings only apply to the taxpayer who requested it, and do not establish precedent. Any taxpayer considering the purchase of an energy storage system should consult their accountant or other tax professional before claiming a tax credit.
Source: The North Carolina Clean Energy Center web site:

http://programs.dsireusa.org/system/program/detail/1235

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