When a resident or business goes solar, they may be eligible for solar tax credits and incentives which can make going solar a bargain. Solar energy systems use solar panels to sell power back to the grid. The grid in turn applies the value of such energy produced to an existing utility bill account. When applying for such tax credits, taxes and tax liability will differ for each individual or entity so it is always good to verify tax information online with your accountant. A tax credit is literally a credit against your tax bill and could be a refund in cash on a tax return or a reduction in what is owed. The amount of tax credits possibly earned depend on the cost of the system, and the laws in place. Homes in New York City and Long Island can qualify for Federal, State, and local income tax credits and property tax abatements (NYC only). Commercial businesses who purchase solar in Long Island and NYC can qualify for Federal Investment Tax Credits, MACRS Depreciation, rebates, and property tax abatements (NYC only)
The Federal Investment Tax credit or the ITC enables a qualified purchaser of solar equipment either resident or business to subtract 30% of such purchases from Federal Taxes owed and it is uncapped. This tax credit applies to both businesses and residences. It may be possible that the entire credit cannot be recouped within the first year but could roll over to subsequent years as long as the law is in place. In the years to come, the Fedral ITC may be reduced from 30% to lower amounts but going solar before such reductions can lock in the 30% credit amount and could thus “grandfather” the system in to that amount. In certain circumstances, a system comes with a utility or state rebate. When a purchasing resident or business receives a rebate, the business or resident will most likely need to deduct the amount of the rebate from the system cost before applying the 30% Federal Investment Tax Credit. With nearly all tax credits, computer tax accounting software and websites ask about such rebates.
The New York State Solar Energy System Equipment Credit as it relates to solar, applies to purchased residential solar equipment which was purchased or leased with contract, and if leased, spans longer than 10 years. The credit is capped at $5,000 and equates to 25% of the cost of the solar equipment contract. It works similarly to the Federal Investment Tax credit but for the cap and that it only applies for residential only.
In Long Island, residences no longer receive a cash rebate. Commercial businesses who buy solar may be Re-eligible for existing rebate programs in both Long Island and New York City including Queens, Brooklyn, Bronx, Staten Island and the Greater New York State areas. Rebate programs vary based on various system parameters and are first-come-first-serve. In New York and The Five Boroughs, the New York State Energy Research and Development Authority (NYSERDA) and can be acquired via your certified installer. In Long Island, PSEG is administering the rebate in conjunction with NYSERDA.
For businesses and Commercial Solar, another tax incentive comes in the form of MACRS (Modified Accelerated Cost Recovery System) depreciation. As it relates to solar, the MACRS is a depreciation method whereby a purchaser of a solar energy system can recover such investments via tax over a period of time. Where various products depreciable lives, can span from 3 to 50 years, solar can be deducted in five years.
In New York City and The Five Boroughs only, a solar energy system installed on a residential or commercial solar energy system may be eligible for a Property Tax Abatement. The Property Tax Abatement or PTA applies a 20% of qualifying system costs to a reduction of property tax split equally over 4 years.
As always, checking with a certified tax professional is a wise decision to help quantify eligibility for mentioned tax incentives. A CPA would evaluate the forms, your unique tax situation, and provide for concrete tax advice.
This publication was contributed to the Queens Ledger by Grid City Energy- the Featured Queens Ledger Solar Energy Provider.