SA Building & Remodeling
Seeing Green: Putting Stimulus Tax Credits to Work-Solar Systems
Rudy Niño (April 11, 2010)
New tax credits and rebates bring sales opportunity for remodelers

Remodelers have a major sales opportunity with solar, thanks to the homeowner tax credits being offered by the American Recovery and Reinvestment Act of 2009. These economic stimulus incentives can make solar power improvements more affordable for more of your customers than ever before.

Taxpayers can receive a 30% tax credit on the cost of qualified solar systems used to generate electricity for their primary residence. Tax credits are set to last until 2016, but are uncapped for 2009 and 2010, after which they’re slated to go to a $2,000 cap for solar investments.

“That means on a $10,000 system, you are taking the out-of-pocket cost down to $7,000,” says Joe Gordon, renewable energy specialist at Solar Service Inc. in Niles, Ill.

A recent Johns Manville-sponsored survey of 784 U.S. homeowners said that 68% are aware of the energy-efficiency tax credits, and 46% of those homeowners intend to take advantage of them. Only 8% of those intending to take the credit say that they will use it for solar energy. Remodeling professionals who have a firm grasp of the tax credits and rebates available to homeowners will have an easier time help prospective clients see the benefits of going solar.

There are two common ways to collect energy from the sun. One is to use a thermal solar collector to gather the sun's heat and the other is to use a photovoltaic (PV) array, which converts the sun's energy to electricity. Solar thermal technology, which provides heat and hot water for the home usually cost around $24,000 in Chicago before state and federal incentives, Gordon says. Photovoltaic systems average $8,000 to $10,000 per kilowatt of PV installed (before incentives). Although installing renewable energy products requires a significant upfront investment from the homeowner, it can save them money in the long run.

“Solar heat and hot water systems can typically offset 30% to 40% of the homeowner’s total gas bill, depending on use, the size of the home, and of course, the weather,” Gordon says. “The money you invest in solar now displaces the monthly payments you would pay month-to-month to the utility company. Once the solar system is paid for, all that energy is free for the life of the solar system, which is many decades.”

To qualify for the tax credit, consumers must use solar panels with a UL or OSHA certification. The best panels available currently have about 15% efficiency. Contractors should provide their customers with a copy of a manufacturer’s certification, and homeowners will need to fill out IRS form 5695 when filing their taxes. The tax credit allowed will be based on actual consumer costs, which include site preparation, assembly, installation, wiring and labor for systems placed into service before January 1, 2017.

In addition to federal tax credits, many utilities, state and local governments offer additional rebates for solar installations. To see which areas provide rebates, check the Database of State Incentives for Renewables and Efficiency at www.dsireusa.org.

A rebate received by a homeowner usually does not have to be reported as income when the rebate is received from the local utility, according to the Solar Energies Industries Association. A homeowner who does not report the rebate as income takes a “tax basis” in solar equipment equal to the net amount he paid. In other words, if the solar equipment has a gross cost of $20,000, but a rebate from the local utility pays $2,000, then his tax basis in the equipment for purposes of calculating the residential tax credit is $18,000. In any case, contractors should always encourage their customers to check with their tax professionals about both tax credits and rebates.

Contributed by NARI

Call Rudy Niño for a quote at (210) 723-2616 or Request an Estimate online.
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