Qualify for 30% tax credit
You can still qualify for a tax credit of 30% to all businesses that install solar panels and solar water heaters before December 31, 2016.
President Obama has spoken at great length about the ability of renewable energy to re-power American homes and businesses and to help re-tool American factories and create jobs. To that end, Congress passed and the President signed The American Recovery and Reinvestment Act of 2009 providing major tax incentive to both consumers and businesses that, among other things, installed solar panels and solar water heaters before December 31, 2016.
Congress passed and President Obama signed The American Recovery and Reinvestment Act of 2009 providing major tax incentive to both consumers and businesses that, among other things, installed solar panels and solar water heaters before December 31, 2016.
Previously, Congress passed the Energy Policy Act of 2005 (EPACT) but most of the tax incentives and research grants went to the gas, coal, and nuclear industries. The law did provide a 30% a Federal income tax credit for the purchase of a solar system by consumers, but the credit was capped at $2,000. Not many consumers rushed out to spend $30,000 on a solar system just to get a $2000 tax credit. And even if they were so inclined; businesses couldn’t take advantage of the law.
All that changed with the passage of The American Recovery and Reinvestment Act of 2009. Many new consumer tax incentives were introduced and existing ones were extended or expanded. And this time businesses, corporations, utilities and governments can take advantage of the law.
Like the previous law, the new legislation provides for a tax credit of 30% on the installed price of solar panels and solar water heaters. But the new legislation has no maximum amount on the tax credit allowed. So if you invest $25,000 in a new solar system you’d get a $7,500 tax credit.
Tax credits apply to any solar system installed before December 31, 2016. With a few exceptions, the solar tax credit is not dependent on where the purchase money comes from. The system can be purchased with cash, a loan, second mortgage, or even your credit card. And the tax credit is calculated on the total installed cost of the solar system – including installation charges and interest on any loans used to make the purchase. More good news for your business: your solar investment can be depreciated over 5 years on an accelerated basis based on 85% of the equipment cost.
The new law also allows for the creation of long-term power purchase contracts, limited partnerships, and pre-paid energy services contracts. These unique financing methods are attractive to investors, who would actually own the solar equipment, claim the 30% tax credit and receive the accelerated depreciation tax deduction. Plus investors would receive monthly utility payments from the business using the solar system.
The business leasing the solar system in turn gets to utilize solar energy in their operation and enjoy lower utility costs – all without making a large cash outlay. In some leasing arrangements, the business can pay off the lease using the savings from its lower monthly electric bills, then take ownership at the end of the lease through a buyout arrangement.
Although there are many regulations and guidelines that must be followed to earn the tax credit (as with any new federal legislation), The American Recovery and Reinvestment Act of 2009 provides a way for almost any business to take part in this solar tax incentive and, in doing so, help with the rebuilding of the American economy. And if that is not enough to inspire you – think of the lower energy bills and tax incentives you’ll enjoy.
But do your research. Economists everywhere are anticipating that the demand for solar systems will significantly increase as a result of the new incentives and predict there will soon be many solar dealers with no prior experience entering the market. Be very careful in selecting a reliable solar dealer who has verifiable installation experience and customer references. The North American Board of Certified Energy Professionals (NABCEP) tests all solar installers at the National level and this certification requires proof of experience and recurring educational courses. States may have their own solar installer and licensing requirements. Contact your state’s Energy Office to locate a certified solar installer for in your area.
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