The Ultimate 2019 Guide To California Solar Tax Credit and Incentives

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The Ultimate 2019 Guide For California Solar Tax Credit and Incentives

I think you’ll agree with me when I say:

Getting the MAXIMUM California solar tax credit and incentives is better than receiving some of the amount.

2019 is the best time to go solar due to dwindling solar incentives, by following these simple steps below you can achieve the biggest bang for your buck.

In today’s post (and video) I’m going to show you how to get the maximum benefit for getting solar installed in California 2019.

Federal Tax Credit For Solar

Graph outlining solar investment tax credit amounts from year 2018 to 2023

Don’t wait too long, the solar tax credit is expiring soon!

2019 is a very important year pertaining to residential energy incentives in California. The Investment Tax Credit (ITC) grants a 30% tax credit to homeowners for installing solar panels before 2020.

As you can see from the graph, getting a solar energy system installed in 2019 grants the maximum 30% solar tax credit before stepping down to 26% in 2020. The federal government will be offering:

  • Only the solar PV systems that are placed into service prior to 12/31/2019 will be eligible for the 30% investment tax credit.
  • The tax credit amount will step down to 26% for solar PV systems put into service between 01/01/2020 and 12/31/2020.
  • Systems put into service between 01/01/2021 and 12/31/2021 will be eligible for a 22% solar tax credit.
  • After 01/01/2022, then the solar tax credit will no longer be available for residential applications.
  • Unlike the Residential Renewable Energy Tax Credit, the Business Energy Investment Tax Credit will still get a tax credit of 10% for solar energy systems placed into service beyond the end of 2021.

The date that your solar panel system is approved to operate determines the year you can claim your tax credit.

The tax credit for solar does not have a maximum limit. You can still claim the full 30% credit without having to worry about a limit. Whether your solar panel system — plus installation — costs you $100,000 or $1,000,000.

How does the federal solar tax credit work?

This tax credit allows up to 30% of the total cost of the system in 2019. If you have a huge tax bill, the credit can be taken all at once or you can utilize the credit over multiple years. For example, if your solar panel system costs $18,000, a 30% tax credit would be $5,400. If you owe $4,000 in taxes for 2019, your tax bill will be reduced to zero, with a remaining $1,400 tax credit for your 2020 and future returns. This IRS solar tax credit comes in real handy when tax season rolls around!

Now to put this in perspective, if a homeowner waited until 2020 to install their solar panel system the tax credit received would be diminished. Take the same example above $18,000 solar panel system but now you will only receive 26% of the tax credit back, equaling  $4680. Owing $4,000 in taxes would still cancel out your tax bill but you are only left with $680 for the next year. A whopping $720 is lost because of not taking advantage of 2019’s 30% solar tax credit.

How To Claim the Solar Tax Credit

How To Claim Solar Tax Credit

Filing to get Investment Tax Credit from installing solar panels is a simple process.

  1. When it is time to file for your taxes, complete the IRS Form 5965 (Federal Solar Tax Credit Form).
  2. Locate the line “Qualified solar electric property costs” on line 1 and enter the full amount of your expenses in that box.
  3. Below that line will be a section on line 6 where you multiply the total by 30% to get the tax credit you will receive back.
  4. Take the number from line 6 on Form 5965 and enter it on Form 1040 in the stated, “residential energy credits” section.
  5. Make sure you include the Form 5695 with your tax submission.

In order to qualify for the credit, you have to own your solar panels. Leasing the panels or being part of a power purchase agreement will not grant you the ITC credit.

Consult your tax advisor for more information on how to claim your 2019 tax credit.

Am I Eligible For The Solar Tax Credit?

Before you can claim the tax credit — like most credits, rebates, or deals — there are eligibility requirements. Whether you’re incorporating solar into your residence or your business. Below is a list of the requirements that make you eligible for the Solar Investment Tax Credit:

RESIDENTIAL REQUIREMENTS:

  • Solar PV system must be providing energy for your home — your system must be approved and in service.
  • Applicable electrical and fire code requirements must be met.
  • Your system must be placed into service — up and running — after 01/01/2006 and on, or before, 12/31/2021.
  • You must own the PV system, whether it was a cash purchase or finance. If you are leasing the system, then you are not eligible for the investment tax credit.

BUSINESS REQUIREMENTS:

  • Your solar equipment products must be new, not used.
  • Your system must be placed into service — up and running — after 01/01/2006 and on or before 12/31/2021.
  • Your solar energy system must be used by someone that is subject to U.S. income taxesThis excludes tax-exempt organizations like charities, schools, and churches.
  • Your solar system must be located within the U.S.
  • The generated energy cannot be used to heat a swimming pool.

ADDITIONAL ELIGIBILITY REQUIREMENTS FOR SOLAR WATER HEATING:

  • The solar water heating equipment must be performance certified by the Solar Rating Certification Corporation (SRCC) or another source endorsed by the governing state where the property is installed.
  • At least 50% of the energy used to heat the water must be solar generated.
  • The solar investment tax credit only applies for water used within the house or building — within the dwelling.

If you’re looking to claim your solar investment tax credit on the current tax year, then you will need to consider the time it takes to get the proper permits, the installation time, and the “go ahead” from the utility company to flip the switch on your solar panel system. This process can take upwards to 10 weeks.

Using Solar Investment Tax Credit For Energy Storage

LG Chem energy storage system installed on wall

People often ask if you are able to claim the solar investment tax credit for energy storage. The answer is YES you can! The main requirement is that you own your solar energy system. Depending if you are installing energy storage on a residential or commercial property will determine the amount of tax credit received.

Residential Property Eligibility:

Energy storage for residential is eligible for the credit, as long as the batter is charged by solar energy system on-site. If you do not have solar installed and utilize the grid to charge the battery, it will not be eligible for the ITC credit.

Commercial Property Eligibility:

Commercial properties tax credit works in a different matter compared to residential properties. The energy storage system is eligible for the credit as long as the battery is charged by a renewable energy system more than 75 percent of the time. The tax credit amount is determined by how often the battery is charged by a solar energy system. To get the full tax credit amount, the battery needs to be charged by renewable energy at 100% of the time. If the battery is charged by renewable energy less than 100% of the time but more than 75% it will receive that portion.

If the battery is charged by a solar energy system 85% of the time, you will only receive 90% of the 30% ITC credit resulting in 27% (90% x 30% = 27%). If you paid $6,000 to install your energy storage battery system, you would be eligible for a $1620 tax credit ($6,000 x 27% = $1620).

Incentives Offered By The State Of California

SGIP Rebate

Dollar bills on top of 1040 u.s. individual income tax return for federal tax credit.

Currently there are no longer incentives or rebates offered by the state of California for installing a solar panel system. The good news is that there is a rebate for installing a energy storage system called the Self-Generation Incentive Program (SGIP)!

Recently California’s Governor Brown signed SB 700. This adds approximately $800 million in additional funding for SGIP and extends the program through 2025.

The California energy storage rebate program was established in 2001.  Until recently, applying for SGIP was a difficult process, especially for residential customers.  The rebate previously worked by making the program funds available on a specific day, and most of the funds were allocated to big industrial-sized energy storage projects, leaving very little left over for homeowners looking to store their solar energy.

For homeowners who are customers of either SDG&E, PG&E, SCE and SCG are eligible for an incentive for up to $400 per kilowatt-hour when you install a home battery. This huge incentive has the ability to cover most of your battery costs. How big the battery is will determine the value you receive per kilowatt.

For example, if you were to install a Tesla Powerwall 2 with a 14 kWh capacity. Under SGIP, the first 10 kWh will recieve up to a $400/kWh incentive, and the remaining is eligible for a $200/kWh incentive. This is worth up to a total of  $4,800 towards the Powerwall equipment, which is worth $5,500!

Why Choose SolarTech?

Dollar bills on top of 1040 u.s. individual income tax return for federal tax credit.

It pays to do your homework when choosing which solar panel company you will go with. There are main key factors at play, which will aid you in your decision including:

  • How long has the company been in business?
  • How reputable is the company? (positive, negative customer reviews)
  • Quality of panels used and workmanship of the installation.
  • Additional incentives offered by the solar company.

At SolarTech, we have been installing solar since 2001, have an abundance of happy customers, utilize the highest quality / efficient solar panels with a 25-year production / workmanship warranty and offer $500 for every solar energy customer referral that installs with us!

Get Rewarded For Going Solar By Choosing The Best!

For the majority of people purchasing a solar panel system, the Solar Investment Tax Credit will have a strong benefit.

Business owners, along with homeowners, can claim up to 30% of the net cost of their solar system by having a system installed by 12/31/2019.

The 30% tax credit has been extended in the past, but it would make the most sense to make your purchase decision sooner, rather than later.

If you’re ready to find out how much solar can impact your home or business, click here for a free consultation from our solar professionals.

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