If you install a solar power system in 2019, the federal government will give you a dollar-for-dollar reduction on any income tax you owe simply for investing in a solar-powered system. It is different than a federal tax refund because you have to owe taxes to collect.
For example, if you owe $5,000.00 in federal taxes when you file and you have a $3,000.00 tax credit, you can apply that tax credit to your tax liability, meaning that, after the credit, you pay $2,000.00 in taxes.
Small solar energy systems are eligible for a 30% federal tax credit through 2019. That credit will decrease to 26% in 2020, then 22% in 2021, then expire altogether on December 31, 2021 unless it is renewed.
You must own your system to qualify for the federal tax credit; hence, a solar lease or power purchase agreement does not qualify for this federal incentive.
In addition to the federal tax credit incentive, there are numerous state, and local incentives being offered across the United States. The database of State Incentives for Renewables and Efficiency (DSIRE) maintained by the University of North Carolina stays current on additional state, local, and utility incentives. Most installers of solar systems stay current with their state and local area incentives and should be able to help you identify everything you are eligible to receive.
If you are thinking about installing a solar photovoltaic (PV) system on your home and are thinking about ways to pay for it, you may want to take advantage of one of the many financing options available, especially if you want to get the 30% federal tax credit.
Everyone’s situation is slightly different making what is best for you dependent on a wide range of factors. The Clean Energy States Alliance Guide will help you to understand the advantages and disadvantages of the various available financing options.
The guide describes the three most popular solar financing options for residential home owners. They are, leases, PPAs, and loans. Each option is explained in terms of advantages and disadvantages. It also attempts to clarify financing terms by providing a list of questions to consider before making your decision.
It also provides a list of other resources to help you learn as much as possible about financing a solar PV system.
Technical considerations are not covered in this guide, nor does it cover your individual local market considerations that may impact financing considerations. A local installer should be able to give you information about state and local programs, policies, products, and rules.
Learn as much as you can to make a decision that is best for your situation.