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Tax Credits for Solar Roofing Installations

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© 2014 Century Roof & Solar

Californians can now get serious tax credits for installing solar roofing. Will you benefit? Can a solar solution improve your home’s energy efficiency, help you get off the grid (at least partially), and maximize your tax dollars?

You may qualify for a federal solar tax credit worth up to 30% of the installation and equipment costs. Previously, this credit maxed out at $2,000. But a recent revision to the rules abolished this ceiling. California also offers credits and rebates. Your local municipality may provide even more incentives.

To qualify, you first need to owe money in taxes. In other words, a credit is not “money back in your pocket” — it simply reduces tax liability. If you don’t owe taxes this year, never fear: credits “roll over,” meaning that you can apply them later. Federal credits are NOT available to renters, but you can qualify, if you’re building a new home or remodeling an old one.

The unlimited cap on the credit only applies to new systems (built between 2009 and 2016). If you install an older solar roofing system, you can still get a credit, but you’ll be capped at $2,000.

What if you opt for a solar power purchase agreement (PPA)? If so, you won’t obtain the credit directly. Instead, your provider will benefit. In exchange, however, your provider should be able to offer you incentives, like reduced installation costs or free installation.

A credit is almost always superior to a deduction. A deduction hits at your taxable income. For instance, let’s say you earned $90,000 for the taxable income. If you get a $7,000 deduction, your taxable income goes down to $83,000. However, a credit of $7,000 comes out of the money you owe to the government. For instance, let’s say you owe $50,000 in taxes. Subtract out a $7,000 credit, and you’ll only owe $43,000.

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