It’s everyone’s favorite time of year – tax season. Although there is still a month to gather documents for last year, it’s never too early to start the number-crunching for the future. One common concern among many tax filers is whether they could have gotten a bigger refund.
At the end of 2019, a large tax credit available to homeowners and businesses will significantly decrease. The Solar Investment Tax Credit (ITC) is 30 percent dollar-for-dollar of the total investment made in your residence or business. For 2019 there is no cap on the amount you can receive as a credit, but it won’t be that way for much longer.
What the Solar Investment Tax Credit means for homeowners
Most homeowners know about common tax incentives available to them. Writing off mortgage interest, charitable contributions, and operating a business from your home have some great tax advantages.
However, many tax incentives people are aware of are examples of deductions, which makes the Solar Investment Tax Credit so special — and simple. Because installing solar through a reputable contractor like Auric Energy is an easy and timely process, a solar system is an efficient way to get big money back at the end of the year.
Here is how the Solar Investment Tax Credit works:
Imagine a homeowner purchases or finances a solar system for $20,000 this year. The tax credit ensures that the homeowner will see 30 percent of the $20,000 ($6,000), as eligible to receive on their next tax return. No matter how the homeowner pays for their solar system, the refund still applies — as long as the solar array is fully operational and inspected by the city or county by the end of 2019.
If the solar is installed after Dec. 31, 2019, however, the tax credit will only be worth 26 percent of the total cost, instead of the 30 percent. That means the homeowner in the example will be eligible for $5,200. The more expensive the system, the larger disparity in refund dollars, potentially leaving thousands of dollars on the line if a large solar array is installed too late.
Acting fast will also ensure you secure Utah-specific tax credits. Homeowners in Utah are eligible for an additional $1,600 state tax credit in 2019, which will drop to $1,200 in 2021.
It’s advisable to consult with a tax professional and ensure you can claim the credit in a timely manner, that is appropriate to your specific tax circumstances. Doing due diligence on your specific tax situation is critical. Solar is a great investment for many homeowners, but it’s important to get it filed correctly.
What the Solar Investment Tax Credit means for business owners
Solar is also an attractive option for many business owners. As with residential projects, the commercial investment tax credit is 30 percent, with rates stepping down after 2019. The difference between residential and commercial projects is the financial scale. Because the refund rate is the same for commercial projects, 30 percent of a commercial-scale solar project can amount to tens of thousands or even hundreds of thousands of dollars.
For example, If a business or property owner decided to pay $100,000 for solar, they would get a $30,000 tax credit. If they paid $1 million, that tax credit is $300,000. There is no cap to the size of installation that can be credited.
Long-term savings, cost-recapture, increased self-reliance, tax relief, and property value enhancement are benefits many businesses seek. With the solar investment tax credit, combined with other incentives, these benefits are available for up to 70 percent off the total cost of a commercial solar system.
With commercial solar arrays being anywhere from 60 to 6,000 panels, it’s best to work with a contractor that understands the needs of the business. Auric Energy has more experience installing commercial-scale solar projects than any other company in Utah.
“We provide free, customized bids based on the energy usage of the facility, and present all the details down to the dollar to make sure the client knows it’s a good fit,” says Courtney Leishman, the director of commercial consulting at Auric Energy.
Businesses of any size can claim these incentives. Here are a few examples of solar projects in Utah, and how much of their costs they were able to recapture:
Are the incentives worth the investment?
There are no other tax credits quite like the investment tax credit. The federal tax credit will pay for 30 percent of a qualifying solar system, with no cap, and the state of Utah will chip in an additional 25 percent, capped at $1,600. Utah’s primary utility, Rocky Mountain Power, has guaranteed locked-in rates for customers who install solar before the current net-metering program reaches full capacity.
“With the incentive set to step down to 26 percent at the end of the year, a lot of customers are making their decision. Currently, you can have almost half of your residential system paid for, and more than two-thirds of a solar system for your business. If you plan on staying in your house, it almost makes the decision a no-brainer,” says Kelly Curtis, chief revenue officer at Auric Energy.
With Auric Energy’s exclusive Production Guarantee and industry-leading 25-year craftsmanship warranty, the investment is secure regardless of the cost.