The Monetary Incentives
I am helping a client take full advantage of federal solar incentives before 2021, when the federal Solar Investment Tax Credit drops from 26 percent to 22 percent, and I know other business owners are unaware of and will be interested in the change. The drop in the Tax Credit would result in a loss of over $5,000 in tax benefits for this client. If you want to get to the financial bottom line first, jump to “Let’s Add It Up” below.
Here is what I shared with my client regarding Federal Solar Incentives and what you should know too:
Incentive 1: The federal REAP Grant (Rural Energy for America Program) is available to more businesses than most people would guess. If you are 1) an agriculture producer or 2) a business owner of any type whose business is in an area of population less than 50,000 and meets certain generous size criteria, the REAP Grant can pay for up to 25 percent of your solar installation. There are two grant cycles. For the 2021 federal fiscal year, the deadline for Cycle 1 (grants of no more than $20,000) is November 2, 2020, and the deadline for Cycle 2 (maximum grant of $500,000) is March 31, 2021. You can learn more here about REAP Grant qualifications: Rural Energy for America Program Renewable Energy Systems & Energy Efficiency Improvement Guaranteed Loans & Grants. The REAP Grant is the first federal incentive that I recommend investigating.
Incentive 2: The Federal Solar Investment Tax Credit allows you to deduct 26 percent of the cost of your solar system in 2020. It is a dollar-for-dollar deduction. If 26 Percent of your system cost is $40,000, then you can deduct $40,000 directly from your taxes. This tax credit reduces to 22 percent in 2021 and then 10 percent from 2022 forward. You can Safe Harbor this tax credit by putting 5 percent down on a solar energy system before the end of 2020. You will then have a little over four years to construct the system. If you are unable to utilize the full 26 percent deduction in the first year, you can roll it over. If you are seeking a REAP Grant, be aware that if you put 5 percent down before your REAP Grant application is submitted and deemed complete then that 5 percent cannot be included in the tax credit. You can learn more about the tax credit here: Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics.
Incentive 3: 100 Percent Bonus Depreciation (temporary – through 2022) allows the solar owner to write off 100 percent of the depreciation of the equipment in the first year. If you are unable to utilize the full amount in the first year, you can carry it backward to previous years or roll it forward to future years. Solar equipment must be placed in service by the end of 2022. The IRS provides additional information here: Tax law offers 100-percent, first-year ‘bonus’ depreciation.
Let’s Add It Up!
If you are a REAP Grant recipient, then up to 75 percent of your solar equipment and installation can be paid for via federal incentives.
If you are NOT a REAP Grant recipient, then up to 50 percent of your solar equipment and installation can be paid for via federal incentives.
When you add in the utility savings from solar energy production (30 to 60 percent of your bill, or more), your benefits are even greater.
Given these financials, the question becomes “Are you ready to dive in and see if solar is right for you?” Each state’s REAP Grant administrator is ready to help with the grant, and Eagle Solar & Light will help you secure the 26 percent tax credit and 100 percent bonus depreciation and install a power plant on your roof. A power plant that will begin saving money immediately and hedge against future utility rate increases.
Contact Eagle Solar & Light Here:
Alabama & Georgia – (205) 202-2208 or (800) 982-0808 Ext. 1
North Carolina – (800) 982-0808 Ext. 2
Laura Combs is Eagle Solar & Light’s Business Development Director in North Carolina. She has a Master’s degree in Urban and Regional Planning, with a specialty in Environmental Planning. Laura is a former environmental, non-profit employee who worked to recover the endangered Florida manatee, is very aware of the need for maintaining slim overhead and maximizing funds, and she is very grateful to bring her knowledge and skills to Eagle Solar & Light and its customers.