Access to residential solar power has grown vastly in the past decade. Tax incentives have been a driving factor behind the accessibility, offering homeowners a variety of savings. Below is an outline of tax and other financial incentives to understand that can make your transition to home solar practical.
What is the Investment Tax Credit (ITC)?
The investment tax credit (ITC), also referred to as the solar tax credit, allows you to deduct 30 percent of the cost of your solar energy system installation from your federal taxes. There is no cap on the credit’s value, so regardless of how sophisticated your solar installation is you are always able to deduct 30 percent of the cost. The one caveat to the ITC is that the 30% federal tax credit is only applicable to solar installations initiated in 2019. Beginning in 2020 and beyond, the tax credit percentage will decrease. You can contact us to get a quote and start your move to home solar today.
What Are Solar Renewable Energy Certificates (SRECs)?
Certain states, including New Jersey and Pennsylvania, which we service here at Vision Solar, are beholden to the Renewable Portfolio Standard. This standard allows for solar renewable energy certificates (SRECs) to be offered to homeowners from their utility company. In other words, homeowners can sell a percentage of the energy their home solar system produce. Homeowners earn one SREC for every 1000 kilowatt hours (kWhs) produced by their solar system and the exchange rate for an SREC varies state by state, but can be as high as $300 per SREC.
As an example, if a home produces 5 SRECs per year and sells each SREC for $200 that homeowner receives $1,000 per year from their utility company.
Sales Tax Exemptions
Certain states, like New Jersey and Pennsylvania, offer full exemption from state sales tax on solar panel installations. This means that homeowners in these two states save a significant percent in cost on their solar installation (6.5% in New Jersey and 8% in Pennsylvania).
Property Tax Exemption
Another tax incentive offered in some states is property tax exemption. Not all states offer this, but homeowners in New Jersey are able to take advantage of this incentive. So how does a homeowner benefit from property tax exemption? Installing a solar power system at your home will increase the value of your property, however your property tax bill won’t increase. In other words, a homeowners property value is increased by the solar system installation, but the homeowner does not have to pay taxes on that home value improvement.
To learn more about solar system installations and if your home qualifies for solar, reach out and we’ll get you started.