Federal and State Incentives

How the State and Federal Incentives Work

Federal

For both residential and commercial, there is a 30% no cap tax credit available for solar thermal and PV. This credit comes directly off the amount of income taxes you owe resulting in a 1:1 reduction of the federal taxes in the first year of ownership. These summaries are not tax advice.  Please consult your tax professional to make sure you can utilize all of the available tax incentives.

State

North Carolina currently offers a 35% tax credit for residential and commercial solar applications. It should be noted that you do lose the federal write-off on state taxes paid when you take any state tax credit. This is illustrated in the examples above as "Loss of Federal Write-off." On the residential end, the state tax credit is capped at $1,400 for solar thermal for domestic hot water, $3,500 for thermal systems that provide combined hot water and space heating (tied in to radiant heating systems), and $10,500 for photovoltaic systems. For businesses the cap is $2,500,000 for both thermal and photovoltaic systems. This is a tax credit as opposed to a write-off, and thus results in a direct 1:1 reduction in your state taxes owed. In most cases this credit must be split evenly amongst the first five years of ownership, but may be carried forward if necessary.  

Solar Renewable Energy Credits (SREC's) 

The solar renewable energy credit program is another incentive for photovoltaic applications. This program provides a premium to owners of PV systems. There are several local buyers of SREC's, NC Greenpower and SREC Trade being common to this area. The amount varies depending on size and application, but is guaranteed at $0.10 per kWh for NC green power and $.25 per kW/hr for SREC Trade in standard sized residential applications.  This payment is in addition the avoided cost payment that the utility is required to pay of approximately $0.05 per kWh, meaning that most residential PV system owners can get almost $0.30 per kWh for their power production.
That is triple the rate you pay for electricity!

SREC Trade          www.srectrade.com
NC GReenpower    www.ncgreenpower.org


MACRS Depreciation

For commercial applications, solar systems are additionally depreciated under the MACRS depreciation schedule. Assuming a 35% tax bracket, this depreciation will account for just shy of 30% of system value. When coupled with state and federal incentives, many businesses see their systems paid for within 5 years and have discounted net present values of 20% or higher.