Many people considering going solar in 2018 seem to share the same question:
Did the tax reform bill just passed in December by Congress and signed into law shortly afterwards affect the incentives available to reduce the cost of solar for homes and small businesses?
Fortunately, the quick answer is “no” — The 30% tax credit is still available for homes and businesses that install solar energy systems.
To give a bit more detail, PV Magazine writes that the tax reform bill leaves federal solar incentives relatively unaffected, saying that any changes are “so small as to be almost cosmetic”:
The historic compromise reached in 2015 set a 30% value for the credit through 2019 and step down to 10% by 2022. There are no changes to those provisions under the new tax bill.
So, even with the changes coming to the federal tax code next year, homeowners and small business owners in Virginia and across the country can get still the solar tax credit for the next few years, though its value will soon start to decline. See below for the details.
Other solar incentives vary by state. In Virginia, the main incentive that’s different from other states is net energy metering, which requires local utilities to buy excess solar power generated by their customers. Some states don’t even offer net metering, so Virginia is ahead of the game on this. Also, in other states that do offer net metering, payments for extra solar power are low, making Virginia’s rate more attractive. See below for more info on this too.
A couple of other incentives are available in Virginia that can bring down the cost of solar. Since incentives can change over time, here we’ll update the main solar incentives available to Virginia homeowners in 2018.
List of Solar Incentives Available in Virginia in 2018
- Net Energy Metering: Once they’re installed, all solar systems connected to the electrical grid can sell their excess power back to their utility for credit on their electric bills, up to a certain maximum. The rate of credit that the utility pays to a homeowner for their extra solar power varies by utility, with Dominion offering the state’s highest rate. Under Virginia’s net-metering rule, homeowners can net meter solar energy systems up to 10 kilowatts in size or commercial systems up to 500 kilowatts.
- Property Tax Exemption: Adding solar can increase the value of your home or business building. In certain areas, homeowners can qualify for an exemption from local property taxes for their solar energy system. In our service area of central and southwestern Virginia, localities offering this tax exemption include the cities of Charlottesville, Harrisonburg, Lexington, Lynchburg and Roanoke, and the counties of Pulaski and Wise. Check this website to see if more place have been added.
- Federal Investment Tax Credit (ITC): The federal tax credit for those who buy solar equipment will be available at its current rate of 30% through 2019. The ITC will then step down to 26% in 2020 and 22% in 2021. After 2021, the credit for homeowners will disappear entirely, though businesses will still be able to qualify for the credit at 10% indefinitely.
- Accelerated Depreciation: Businesses can deduct 85% of the value of the solar asset from their federal taxes over a five-year period. (Note: Claiming the accelerated depreciation may reduce the amount of a solar system eligible for the 30% federal tax credit.)
- USDA Renewable Energy for America Program Loans and Grants: Here’s another one for businesses. The program’s title is a mouthful but the REAP loans and grants are a good opportunity for farms and other businesses located in rural areas — even businesses that are not in agriculture — to qualify for a cash grant or low-interest loan to purchase a solar energy system. We’re talking about real money here. Grants range from $2,500 up to $500,000. Loans range from $5,000 up to $25 million. Read more about the program in Virginia.
Other programs, like low-interest loans through the property assessed clean energy program (PACE) are available in certain areas.
And remember that all these programs may be time limited. Some already have sunset dates, like the 30% federal tax credit. Others could be changed or eliminated in the future. Fortunately, if you get solar while any of these incentives is still offered, you can usually lock in that incentive for future years at the same rate of benefit that was current when you got solar installed.
An experienced solar installer like Main Street Solar can help both homes and businesses qualify for the maximum number of incentives available for their location.
If you wonder how much a solar system would cost for you after incentives, ask us for a free quote.
— Andrew Brenner, Main Street Solar