Going solar can be a great way to save on electricity bills and add value to your home — especially when the solar investment tax credit (ITC) offers such an appealing discount. Those considering taking advantage of the massive 30% deduction on the cost of a solar panel system should act fast, however, as the credit won’t last forever. In fact, the first scale back on the credit is slated to happen as soon as 2020. That means 2019 is the last year to take advantage of the full federal tax credit along with any California solar tax credits.
While some people may not like that there will be major cuts into the federal investment tax credit for solar panel systems, it is important to remember the original establishment of the credit. When the Energy Policy Act that included the ITC was enacted in 2005, it was only slated to last for two years. Numerous extensions resulted in the credit remaining effective through 2016. Even though those extensions were set to expire, many solar and energy experts pushed for an additional extension of five years to allow for the solar industry to grow even more. In 2015, Congress passed a bill that extended the credit all the way through 2021, with some adjustments year to year.
Here is the timeline for extended federal tax credit:
The first extension on the ITC pushed it through 2016, maintaining the original 30% tax deduction for homeowners as soon as their system was operational.
Additional extension pushed through, preserving the 30% deduction based on the entire cost of the solar panel system, allowing for optimal discounts for homeowners.
Any new solar panel system installed after 12/31/2019 will only be eligible for a tax deduction of 26% of the installation expenses.
After 12/31/2020, homeowners and commercial property owners will only be able to deduct 22% of the solar system costs from taxes.
The new tax credit rate for commercial solar systems will be 10%, while homeowners will no longer be offered any federal tax credit for new systems installed.
Keep in mind, newer legislation enables solar energy system owners to claim the tax credit even if the system isn’t fully operational — so long as construction is completed. The only requirement is that the system be up and running by 2023.
Any homeowner who has installed and owns their solar panel system will remain eligible for the full 30% tax credit through 2019 and any subsequent credits the years following.Just make sure to file IRS Form 5695. What if you are not going to have enough tax liability to even claim the full credit? The credit can be split between years, rolling into the next years for as long as the credit is still in effect.
Ready to take advantage of the federal solar investment tax credit before it gets cut back? Semper Solaris can help you get the ball rolling. Reach out today.
As solar technology continues to improve and sustainable energy options become more and more accessible, homeowners across California and the U.S. are beginning to line up to switch to solar. The great news about going solar in San Diego? Homeowners don’t also have to have the savings to cover all the upfront expenses of installing a solar panel system. That means all the benefits of switching to solar are available without the initial heavy financial burden.
For homeowners that don’t want to purchase their solar panels and system from day one, there are two main alternatives: solar leases and solar PPA agreements. Under a solar PPA, a homeowner purchases the electricity produced by the solar panels installed on their home (still owned by the solar company) at an agreed upon rate. They basically only get the immediate benefits of more affordable and sustainable energy.
While PPA agreements can be attractive to some, others may prefer more flexibility that general leases offer. Under a solar lease, the homeowner still doesn’t own the solar panels or other equipment installed on their home, however, they still have the same net metering process as solar owners would. Generally speaking, the monthly savings homeowners get on their electricity bill will exceed the monthly lease payment, resulting in instant savings. Over the lifetime of a system, a homeowner can see as much as 70% savings on their electricity expenses.
When it comes to going solar, you have to make sure you settle on the right lease agreement. So what are your options?
Here are some of the most common solar lease agreements:
With so many options for going solar, it can be overwhelming to make decisions on everything from type of solar arrays to financial agreements. That’s why Semper Solaris is here to provide the guidance and insight you need on solar financing. Over the years, our San Diego solar company has installed thousands of residential solar projects. Time and time again, we’ve helped homeowners select the right solar agreement for their financial situation. When you work with our team, we’ll review your budget and preferences and help you select the best solar leasing option.
Interested in learning more? Give Semper Solaris a call anytime to get connected with a solar expert!
PPA vs. Lease: What’s Right for Solar?
When it comes to getting a solar panel system installed on your roof, there are many decisions to be made – including tough financial decisions. For some homeowners, the ability to finance a system may not be possible. This is where solar leases and Power Purchase Agreements (PPAs) come into play. These are two options available to homeowners who are looking to save on their electricity bills by switching to solar without carrying the full financial burden of financing or paying off their own solar system. Under both a solar lease and solar PPA, the homeowner themselves will not own the actual solar energy installation placed onto their roof. Instead, a PPA or lease company has true ownership over the system. While very similar, PPAs and leases have some very distinct differences between them. Selecting the right one for your project is important!
Breaking Down Your Solar Options
The specifics of the agreements can vary based on homeowner preference. For example, a contractor may offer zero down, free installation, a down payment, prepaid leases, varying kW sizes, and other factors.
Make the Best Solar Choice for Your Needs
So what’s the better option, a solar lease or PPA? At the end of the day, it comes down to what makes the most sense for your particular situation. You may prefer to not have a lease payment and be able to negotiate on the pricing of your electricity with a PPA or like the flexibility of leasing panels while buying / selling the electricity produced by it. The last option available to homeowners is financing or paying cash. For those that are able to, this is the most financially beneficial, as the homeowner will typically be able to pay offer the system in 12 or less years. Still, both solar leases and PPA agreement are viable options for those that want to benefit from the perks of solar without all the upfront costs.
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