Tax Credits for Solar System Purchase
Solar consumers are eligible for federal tax incentives for the purchase and installation of eligible solar systems, including both solar photovoltaics (PV) and solar hot water (solar thermal) systems, as well as other renewable energy investments.
The following information regarding taxes, tax credits and depreciation is meant to make the reader aware of these benefits, risks and potential expenses, and help avoid claims by aggressive salespeople. It is not tax advice. Please seek professional advice from a qualified tax advisor to check the applicability and eligibility before claiming any tax benefits or exemptions.
Solar tax credits were enacted in 2008 as part of the Emergency Economic Stabilization Act, which included $18 billion in incentives for clean and renewable energy technologies, as well as for energy efficiency improvements. The 2008 legislation extended the solar investment tax credit (ITC) through December 31, 2016 and made other modifications to the tax credits. Legislation in late 2015 renewed these credits for five years with an incremental de-escalation of the credits. The solar ITC offers:
- A federal investment tax credit for both residential and commercial consumers is available for both photovoltaics and solar water heating systems..
- A consumer must have a federal tax liability to take advantage of the solar investment tax credit.
- Prior to 2009, residential solar installations had a per project cap of $2,000 tax credit. With current legislation, the solar ITC for residential system owners is 30% of the total system cost with no upper limit.
- The 30% rate is available for systems placed in service through December 31, 2019. The credit drops to 26% through the end of 2020, then 22% through 2021 before dropping to zero by the end of 2021.
- The federal tax credit is a one-time credit, but may be carried forward (and possibly back) if not completely useable in the system installation tax year. Rules about carrying forward and backward may vary between residential and commercial tax filers; please consult a tax professional for the current rules.
- Eligible projects may take a “grant in lieu of tax credit” under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Section 1603). The 1603 grant program is administered by the United States Department of the Treasury (Treasury). By receiving payments for property under section 1603, applicants are electing to forego tax credits with respect to such property for the taxable year in which the payment is made or any subsequent taxable year.
- Residential customers in higher income tax brackets see comparatively more value because residential electricity expenses are paid with after-tax dollars—they aren’t tax deductible.
- The IRS current federal tax form for the Investment Credits is Form 3468 is available at www.irs.gov/formspubs.
- Business owned systems may also be eligible for MACRS 5-year Accelerated Depreciation using IRS federal form 4562 available at www.irs.gov/formspubs. For more info on commercial tax benefits please contact your tax preparer or a tax attorney.
- Municipal and non-profit entities do not have to worry about these tax issues, as they are generally tax-exempt.
- The solar system owner has the ability to take advantage of the solar tax credit. Entities without a federal tax liability sometimes use third-party system owner arrangements to install solar since a third-party can take advantage of the solar investment tax credit, passing along some savings to the solar system host customer.
- Bonus Depreciation was expanded to 100% for solar projects placed in service in 2011, and 50% for projects placed in service in 2012. “Bonus Depreciation” means acceleration of the otherwise applicable depreciation (not “more” depreciation, but “sooner” depreciation). 100% Bonus Depreciation means that the whole project’s applicable tax depreciation is accelerated to 2011.
How much could PG&E’s rates rise? What you need to know
Pacific Gas and Electric’s customers were warned about the cost of massive wildfires that it may have sparked. Even before California’s largest utility filed bankruptcy proceedings at the start of the year, lawyers, policymakers and consumer advocates all cautioned that the company’s liabilities in those fires would, one way or another, hit the pocketbooks of its 16 million customers.
We don’t have a full picture yet. We do know PG&E is seeking double-digit rate increases to help reduce the risk of future fires. But there isn’t agreement yet on how much the company will be held financially responsible for the deadly and destructive wildfires in 2017 and 2018. Thus far, the company has pledged that shareholders – not customers – will shoulder those liabilities, but advocates remain skeptical and worry how much might be passed on.
Just recently, U.S. Bankruptcy Judge Dennis Montali ruled that a jury can decide whether the utility is liable in the Tubbs Fire in Sonoma County, even though investigators pinned the source on private electrical equipment, not PG&E (more on this later).
One thing is sure: Consumers could pay as much as $30 more a month if PG&E gets all the increases it has asked for so far. Here’s what we know so far about how much PG&E’s rates could go up.
How much does PG&E charge?
PG&E’s customers are already paying some of the highest electricity rates in the state, if not the country. The utility’s average rate is 20.06 cents per kilowatt hour, compared with an average 16.06 cents statewide and 10.48 cents nationally.
But interestingly, those higher rates are offset by California’s higher efficiency. The state’s average monthly consumption is about 300 kilowatt hours less than the U.S. average, with California’s average monthly electricity bill at $101.49 compared to $111.67 nationwide.
The average residential PG&E customer pays $113.64 a month for electricity and $52.30 for gas, or about $165.94 a month as of last year, according to the company. The monthly average went up to $172.94 this year.