What you need to know about Solar Tax Credits: Part 2

December 16th, 2012


Part 2: North Carolina State 35% Solar Tax Credit


Living in North Carolina is a great advantage for those interested in solar. Not only do you get to benefit from the Federal Solar Tax Credit that I discussed in Part 1 of this series, you also can take advantage of our state solar tax credit, one of the most generous and aggressive renewable energy programs in the country. In this part of the tax credit series, I will go over the basics of the tax credit for both residential and business use, and how you can best take advantage of this great (and limited!) opportunity. 

Combining federal and state tax incentives can save individuals nearly 80% off solar systems

I'll begin by going over the residential tax credit for solar (and other qualifying renewable) installations. It is available until January 1st, 2016, so you have some time to review the details if you need to.  You also receive an 80% abatement on the property tax value of the installation, so you shouldn't have to worry about a heavy increase in your property tax if you build on your home. There are some rules that must be followed in order to qualify for the residential renewable tax credit. The first, and probably the most obvious, is the solar array MUST be installed in North Carolina. The tax credit is spread out in 7% increments over 5 years. You can apply the tax credit towards personal income tax, gross premiums tax (this is a tax on insurance companies), or franchise taxes. Additionally, the tax credit may only be applied to 50% of your tax liability. In other words, if you have a tax bill of $10,000 at the end of the year, you may only apply up to $5,000 in credits against what you owe. Because of these rules, the numbers become tricky, and typically unless you make above a certain income level, the tax credit will do little to assist you in building a solar system. There are also some caps on how much you can receive in tax credits, based on the type of system you would install. They are as follows

– $1,400 for solar thermal or hot water heating, including swimming pools
– $3,500 for solar active space heating, combined active space and domestic hot water systems,
and passive space heating;
– $8,400 for geothermal heat pumps or equipment
– $10,500 for solar photovoltaics, wind, or other renewable-energy systems


Now that we've gone over a few of the rules, let's crunch some numbers in an example:

You decide to build a 5 kilowatt solar photovoltaic array on the roof of your home. The cost of the array is $25,000. Applying the 35% state tax credit would result in $8,750 (that's $25,000 x 0.35) in tax credits spread out over 5 years. For each year, you would receive $1,750 in tax credits. Now remember, this is a credit, and by law you can only apply it against 50% of your annual liability. So in order to take the full $1,750, you must owe at least $3,500 in state income tax to take the full amount of the credit. At the current rate of about 7% state income tax rate, you will need to make an income of at least $50,000 annually to take the full credit. Typically this minimum amount is not a problem, as most people who are willing to spend $25,000 on solar will make more than this annually. Still, it should be considered so you know exactly what is available to you.

Now the state credit is federally taxable, so Uncle Sam is going to look at your tax credit as income and will want its share of the money coming to you. This is an unfortunate ruling by the IRS, but it must be paid. The amount owed will be based on your tax rate. So if you are in the 25% federal income tax bracket, using the above example you will owe $437.50 each year you take the $1,750 tax credit to the federal government. By the time you've gone through 5 years of collecting that credit, your original $8,750 in state tax credits will really only be $6,562.50.

Wow. That was a lot of math. I apologize if there was any confusion over this, but once all of this information can be deciphered (most likely by an accountant), you can combine both the state and federal tax credits and see quite a large savings in your solar system purchase!

Apple Inc.'s large scale solar farm in Maiden, NC

For the corporate tax credit, many of the same restrictions apply to the general qualifications of building a solar array, but the cap on system installations is raised to $2.5 Million dollars. Because this value is so high, there has been a nice boom in large solar farms in the state over the past few years. Companies with large tax liabilities will typically build solar farms, connect to a utility grid in either Duke or Progress Energy territory, and sell the electricity back to the utility for a profit. Unfortunately, because these numbers are in the form of tax credits, you must be a very large and very profitable company within the state to be able to have this lucrative opportunity! This, in my opinion, was one of the major flaws in the state tax credit when it was enacted. It is heavily in favor towards large profitable companies, but quite restrictive in promoting growth in residential or small business solar installations.

DSIRE Renewable Database (www.dsireusa.org)

The Database of State Incentives for Renewables & Efficiency (DSIRE) was first developed in 1995 and is based in the North Carolina Solar Center. The site is a great tool if you wish to learn more about state and renewable federal incentives. Even if you are not located in North Carolina, DSIRE's database keeps up-to-date information on state incentives throughout the country. Please click on the link and check out what is currently being offered in your home state. In addition to government programs, there are several incentives, grants, and rebates offered by utilities and electric cooperatives that you may also qualify for.

This has probably been my most advanced discussion on solar since I started this blog in September.  I've really only covered the surface, and there is much more that can be written, but I also want to keep everything I write as simple and easy to understand as I possibly can, so I will end things on a good note and let you get back to your family for the holidays and enjoy time spent with loved ones. Have a Merry Christmas and a Sunny New Year!

What you need to know about Tax Credits Part 1

December 14th, 2012

The end of the year is almost upon us, and since everyone is talking about tax strategies and fiscal cliffs and federal programs, I feel it would be appropriate to discuss tax credits for solar and how you can use them to help install solar for your home or small business. I will warn you, there will be some numbers and a few details involved, so I will try to keep things plain and simple so that you will have a working knowledge of how you can take maximum advantage of the tax credits and programs available to you. I'm going to divide this up into 2 parts and publish separately so you may take in this information slowly and digest and if you have any questions, don't hesitate to ask!

Knowing all the solar tax credits available to you can save a LOT of money when it's time to file your tax returns

Part 1. The Federal 30% Investment Tax Credit.


The Federal Tax Credit was enacted by The Energy Policy Act of 2005, and provides a 30% tax credit to individuals and businesses installing approved solar systems. It was later amended to also include wind and other renewable energy systems. This tax credit is available until December 31st, 2016, or until congress decides to change the law. After the reelection of President Obama, it is probably unlikely that Washington will prematurely end the program, but who really knows, right? Nonetheless, while it is still available, if you are considering putting solar on your home, this is going to be your best friend.

A very good question I hear from a lot of home owners is "What parts of the system qualify for the tax credit?" It is actually quite a bit, and this comes as good news to everyone. The solar modules, wiring, racking, inverters, power point trackers, batteries, piping, and any other parts or materials needed to complete the installation and interconnect to the home counts towards the tax credit. So does the labor, development, on-site preparation, and any additional installer fees that might be included in the final bill. Things that wouldn't be included, for instance, if you decide to build a ground mounted solar array on a newly purchased piece of land. The purchase value of the land is not included into the tax credit equation. Or if you decide to lay a new roof on your home and then put down a solar array. The roof would not be counted towards the federal tax credit. Still, this is quite a relief to many homeowners knowing they are getting a tax credit for nearly all the cost of a new solar system.

You must remember, though, this is a tax CREDIT. You don't receive a check, the amount is not discounted from your installer's bill. You are still required to pay the full amount due for services. The credit is received on your tax returns the following year and you reduce the amount you owe to the IRS by the credit you received from the solar installation. Let's do an example.

You purchase a 5 kilowatt solar system on your home from your local solar installer. The final bill due is $20,000. With the Federal 30% tax credit, you will receive $6,000 in tax credits which can be applied to your tax returns. If you owe $8,000 in taxes, then you subtract $6,000 from $8,000, and now your tax bill will be reduced to $2,000. This is where you get your money back for the installation.

But what if your taxes are lower than the credit you received? Let's say in the previous example you only owed $3,000 in a single tax year. Unfortunately, you can only reduce your taxes to the maximum of what you owe. The government will not issue you a check for the remainder $3,000 credit. Wouldn't that be nice if they did? What you can do, though, is forward the remainder $3,000 in tax credits to the following tax year. So when it comes time to file for the following year, you may apply the remainder to what you owe against future taxes.

So, if you are anticipating recouping all of your tax credits in your first year, you must make sure you have the tax liability to do so! Otherwise you will be forced to take the credits incrementally until they are used up.


In the next part of this discussion I will go over the North Carolina State Tax credit and some online resources you can use to help find additional tax incentives in your home state.


Merry Christmas!

Regional Chemistry Conference Meets in Raleigh to Promote Sustainability

November 17th, 2012

The Downtown Raleigh Convention Center was host to the Regional ACS Meeting November 14th-17th.

The Annual Southeastern Regional Meeting of the American Chemical Society (SERMACS) was held at the Convention Center in downtown Raleigh on November 14th-17th (http://www.sermacs2012.org/). The theme of this years conference was "Catalyzing Sustainable Innovation" and promoted scientific research in the area of sustainable energy. This was particularly highlighted by the meeting of the Energy Frontier Research Council (EFRC) for the first two days of the conference, which held talks and poster presentations ranging from hydrogen-producing solar materials to promoting green education in schools and universities around the world. 

Professor Frank Osterloh, University of California-Davis, presenting on solar nanomatrials research in his laboratories.

The EFRC portion of the conference kicked off Wednesday with an opening talk from Chair and Professor Thomas Meyer from UNC-Chapel Hill, followed by 14 scientific research presentations from Professors and Industry Researchers hailing from all over the U.S. and as far away as Uppsala, Sweden. Several talks were themed around solar fuel nanomaterials, such as the presenation on nanostructured photocatalysts by Professor Frank Osterloh at the University of California-Davis. He and his fellow researchers have created metal oxide nanoparticles that convert water into hydrogen fuel using sunlight. Professor Osterloh and his colleagues hope that one day materials like these can be used commercially to power vehicles, businesses, and homes.

The Shark Project is an educational research kit that helps students research for new possible solar materials in high school science classes

 Professor Bruce Parkinson from the University of Wyoming introduced the Shark Project (http://www.thesharkproject.org/), which is a nonprofit educational research kit for high school science classes that helps students look for new solar materials. "This is real university research performed by high school students in a laboratory setting" Professor Parkinson mentioned during his talk. The kit itself is made of lego parts the students can build, then uses a common inkjet printer to print different oxides onto a sheet that can be analyzed for useful photochemical properties.

North Carolina State University graduate students Nacole King and Jonathan Boltersdorf presented their research on metal-oxide solar materials during the EFRC Conference Thursday.

The conference also included a poster presentation in which several undergraduate and graduate students were given an opportunity to share their important research with a public audience. Two graduate students in Professor Paul Maggard's lab at North Carolina State University in Raleigh, Nacole King and Jonathan Boltersdorf, presented their research on nanomaterial solar photocatalysts. The two researchers use a unique synthetic method called flux synthesis to prepare materials that give them enhanced solar properties and increase performance. Perhaps one day these advanced materials will be used commercially to power your home!


The EFRC and the Solar Energy Research Center is based at the University of North Carolina at Chapel Hill and was started to address the challenges of creating a sustainable energy future. You can visit their website at http://www.serc.unc.edu/index.html. The center operates on a 5 year $17.5 million Department of Energy budget along with other matching funds donated from UNC. The program is a collaborative venture that works closely with Duke, North Carolina Central University, North Carolina State University, and the University of Florida.