Solar Panels &
Solar Water Heating Systems
two smart ideas.

• What federal tax credits are available for solar panels and solar water heaters?
  • There is a federal tax credit available for up to 30% of the system’s cost. Expenditures include labor costs for onsite preparation, system installing, and wiring to interconnect the system to the home.
    
    Example: If a solar panel system costs you $24,000 with all eligible expenses, your maximum federal tax credit amount would be $7,200 or 30%.
• Is there a maximum federal tax credit amount for eligible systems?
  • No. With the signing of the American Recovery and Reinvestment Act of 2009, the maximum credit amount of $2,000 was lifted. Currently, there is no maximum credit amount on either solar panels or solar water heating systems.
• What incentives are available at the state level?
  • Solar incentives are available in many states but differ in each. State incentives range from tax credits or rebates, to property tax exemptions and utility rate discounts. Tax credits and rebates can be as much as 50% of the system’s cost. See the table below for a summary of incentives currently available in your state. Specific details on available state incentives can be found by visiting the website www.dsireusa.org.
    
    

    State

    Federal Tax Credit

    State Tax Credit or Rebate

    Net Metering

    Property Tax Exemption

    Utility Discount or Rebate

    Sales Tax Exemption or Rebate

    AZ

    AL

    AR

    CO

    DE

    FL

    GA

    IA

    ID

    IL

    IN

    KS

    KY

    LA

    MD

    MI

    MN

    MO

    MS

    MT

    NC

    ND

    NE

    NM

    NV

    NY

    OH

    OK

    PA

    SC

    SD

    TN

    TX

    UT

    VA

    WI

    WV

    WY

    Specific details on available incentives can be found by visiting the website www.dsireusa.org. We have provided this information for general guidance only. All information is believed to be accurate at the time of publication, but is in no way a guarantee of completeness, accuracy, or timeliness. This does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. Prior to making any decision or taking any action based on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information in this publication is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.

• What if the tax credit exceeds your tax liability?
  • If a tax credit exceeds your tax liability, that additional amount can usually be carried forward to the succeeding taxable year.
    
    Example: You paid $24,000 for a solar panel system. Your maximum tax credit amount is $7,200 or 30% of the system’s $24,000 cost. If your tax liability is $5,000, you can only claim a maximum of $5,000 on your 2009 taxes. The additional $2,200 tax credit can usually be claimed on the following year’s taxes.
• Is a tax credit the same as a tax deduction?
  • No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit, would pay nothing.
• Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
  • Yes. Prospective home buyers who will be adding either of these solar systems, and believe they will qualify for the tax credits, are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay.
    
    Buyers can adjust their withholding amount on their W-4 via their employer or through their quarterly, estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
• What is Net Metering?
  • Available in over 40 states, Net Metering is an incentive for consumers to invest in renewable energy systems. Net Metering measures excess electricity produced through the solar system by spinning the energy meter backwards, banking the electricity until it is needed. This provides the customer with full retail value for the electricity produced. Customers receive retail prices for excess electricity they generate through solar power. Interconnecting with the utility is done using a standard meter.
• What if your state does not have net metering?
  • A customer can use the electricity they generate to offset electricity they would otherwise have to purchase from the utility company at the retail price. Any excess electricity is purchased at the wholesale price. To measure excess energy without net metering, an additional (second) meter must be installed at the customer’s expense.
• What is the initial cost of solar panels?
  • All American Homes offers a 2.5kw solar panel system that starts around $24,000. Depending on the size and type of home, the solar panel system may be expanded. Prices will vary based on the system’s size.
• What kind of payback can you expect on a solar panel system?
  • With all of the federal and state tax credits/rebates currently available, you could possibly cover most of your initial expenses within the next one or two tax years. Once installed, solar panels can save you up to 50% (or more) on your monthly energy bills. This means an immediate payback to you every month.
    
    Example: If your monthly energy bill would have been $200 without solar panels, then with solar panels saving you 50%, you would save $100 a month or $1,200 a year. Savings will vary based on number of people living in the home, climate, and a number of other factors.
• What kind of payback can you expect with a solar water heating system?
  • Water heating is responsible for up to 17% of your energy consumption. Every month our HeliodyneTM solar water heating system can save you up to 75% on your water heating energy costs. This system typically will pay itself off multiple times over its lifespan. Savings will vary based on number of people living in the home, climate and a number of other factors.
• Will adding solar systems increase the value of your home?
  • It is very possible for solar systems to increase the value of your home. Showing a potential home buyer the monthly energy savings from the solar systems can create instant additional value for your home. The panels are also easily recognizable, and can create added value simply upon a potential home buyer’s first look at the home.
• How can these solar systems minimize the effects of rising energy costs?
  • Installing solar systems is like insurance against future energy cost increases. The more you take advantage of solar power, the less you are exposed to energy cost increases.