The End of Federal Tax Credit and Focus On Energy Cash Incentives
When we look at the growth of the solar energy industry, there are several factors;
- The plummeting cost of solar modules
- The significant increases in solar module efficiency
- The increased levels of certification and experience of installers
- Favorable net metering policies by utilities (unfortunately, this keeps going back and forth)
- Greater understanding of the benefits of solar by the general public
In the eyes of solar system customers, there are two factors that really stand out;
- State and utility incentives
- 30% Federal Tax credit
Known officially as the Residential Renewable Energy Tax Credit, The Energy Policy Act of 2005 established the federal tax credit for residential energy property. Among the pertinent points of this tax credit;
- There is no maximum credit for systems placed in service after 2008.
- Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
- The home served by the system does not have to be the taxpayer’s principal residence.
To have this tax credit deadline extended, it will take quite literally an act of congress. Unless the unexpected occurs, December 31, 2016 becomes an important day for those installing a renewable energy system and looking to take advantage of the 30% tax credit.
We in Wisconsin, have another reason for concern.
While we have not received any official notification, we are hearing noises from Focus On Energy that the successful Residential Rewards Program may be suspended after 2016 funds are exhausted.
We must be sure to note that nothing is official. CB&I, the administrator of the Focus On Energy program, and will be meeting with the Public Service Commission in 2016 to discuss the continuation of this funding. As many of you know, recent rulings by the PSC have not been favorable towards renewable energy. Certainly there is reason for concern.
So, if this does come to pass, it will deal a second financial blow to Wisconsin solar energy customers who install their systems after 12/31/2016. Let’s look at how the loss of this funding might be felt on a somewhat typical 6.0kW residential installation.
The installed cost of this system might be about $22,000. The homeowner could qualify for a $2,400 Focus On Energy reward, which would be paid to the system owner about 60 days after installation. Additionally, the system owner would qualify for a $5,880 federal tax credit which could be applied on their next federal tax return.
Combining these two incentives, the net cost of installation for this ‘typical’ system is lowered by $8,280 or 38%.
If you want to take advantage of these financial incentives, now is the time to take action.