Using the Sun to Shrink Taxes

Written by Peter Tran

June 30, 2017

Solar power has come a long way n recent years.  ncreased producton has reduced costs whle advances n technology have ncreased the effcency of solar panels. ncreased regulaton and rsng fuel prces have made tradtonal forms of electrcty more expensve.  At the same tme, state and federal tax credts are offsettng much of the cost of nstallaton and causng many homeowners to gve solar energy a second look.

s the tme rght for you to go green?  Today, we’ll dscuss some of the effcency gans and cost savngs that solar energy has experenced n recent years and take a look at the tax credts avalable to those who add solar energy to ther homes’ electrcal grd.

  Accordng to Jule Ltwn, a ultant wth Berkeley Sprngs-based MTV Solar, the overall cost of resdental solar has decreased by approxmately 40% n recent years whle the amount of energy produced per panel has ncreased 10-15%.  An perk for West Vrgna solar users s the state’s status as a “Net-Metered” state.  Ths means that homeowners wth solar arrays can actually sell ther unused energy back to the electrc company.  “Thnk of t as roll-over mnutes for your electrc bll,” says Ltwn. 

Solar Tax Credts Reduce Cost:  There are currently two prmary tax credts avalable to WV resdents for nstallng solar panels n ther homes: The Federal Resdental Renewable Energy Tax Credt and the WV Resdental Solar Energy Tax Credt.  Both credts are non-refundable, meanng that each can reduce your tax lablty but cannot generate a refund beyond wthholdngs and estmated tax payments made durng the year.  How much wll these credts reduce the cost of addng solar energy to your home’s electrcal grd?  Let’s take a look at each.

Federal Resdental Renewable Energy Credt:  The Resdental Renewable Energy Credt was enacted n 2006.  Through 2008, the credt offered a non-refundable tax credt of 30% of the cost of solar electrc s placed n servce, but the credt was capped at $2,000.  For tax years 2009 and after, however, the credt cap was lfted.  The Federal Resdental Renewable Energy Credt wll remburse resdental homeowners for 30% of the cost of solar electrcal s (and other forms of renewable energy) placed n servce n those tax years.  nstallaton costs can be ncluded when detnng the amount of the credt.  The credt can be clamed on prmary and secondary resdences.  Rental homes, however, wll not qualfy for ths credt.  The Credt s clamed on Part of Form 5695, Resdental Energy Credts. Any unused credt can be carred forward to the followng tax year.

WV Resdental Solar Energy Credt:  The second credt avalable to West Vrgna homeowners s the Resdental Solar Energy Tax Credt.  Ths non-refundable credt wll reduce homeowners’ WV tax oblgaton by 30% of the cost of purchasng and nstallng solar energy s (ncludng solar ng, coolng, and hot water s) up to a maxmum credt of $2,000.  Any unused credt can be carred forward to the followng year untl July 1, 2014.  Any credt not used by ths date s lost. 

What does ths mean for the average homeowner?  Accordng to Ltwn, an nvestment n 22 solar panels would reduce the average-szed home’s energy bll by up to 40%.  The estmated cost of such an array, ncludng nstallaton, s approxmately $26,000 before applyng any of the tax credts dscussed below.  The after-tax cost of such a , however, would only be $16,200 ($26,000 mnus 30% federal tax credt of $7,800 and the $2,000 WV tax credt).  Ltwn says that customers are seeng an RO (Return on nvestment: the tme t takes for the energy savngs to pay for the cost of the and generate postve cash flow) of between 6 and 9 years after applyng the tax credts.

Use the to shrnk your tax bll and, as always, please remember that ths artcle s for nformatonal purposes only and does not ttute tax advce. f you should have any questons or need assstance preparng your return or solvng your own tax “problems,” please feel free to contact our offce at 304 267-2594. 
Jule Ltwn of MTV Solar can be red at 304-258-4733.

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