Solar
In the January edition of Local Ties, Chris Pederson wrote about a renewable energy conference we attended in Washington DC. When I saw the conference being advertised, I thought it was a good opportunity to learn more about this industry and get some quality continuing education in. The conference certainly did not disappoint, and I would rate it at the top of all taxation and finance conferences I have been to over the years.
At Heintz & Clark, Ltd, we strive to create great working relationships with our clients. We do a fair amount of tax planning with our clients to help them legally lower their taxes. At this conference, I found that 2019 provides a unique opportunity for taxpayers to invest in renewable energy as a tax savings strategy.
Individual Taxpayers
Homeowners that have been interested in investing in solar energy for their home will find that 2019 provides an opportunity to make this investment economical. The IRS provides for a 30% tax credit under the Residential Energy Efficient Property Credit. Being this is a credit, it directly reduces the tax owed for the year (i.e. a $30k system reduces the tax owed by $9k). This credit is set to phase-out over the next 3 years, dropping to 26% for 2020. There is also a solar rewards program, where the homeowner receives a credit for every kWh produced by their system. This credit is given by the utility company. If you are in Xcel’s territory, the credit is $.07 per kWh.
These programs, along with some great financing options by local banks makes the investment into solar energy an economical investment in 2019. Financing options include little to no money down, essentially allowing the homeowner to pay the loan off with the energy cost savings. Once the loan is paid off, the homeowner owns the system outright, and is on their way to energy independence!
Commercial Taxpayers
Many of our small business and real estate clients are always looking for smart investments that can reduce their tax burden as well as their fixed costs. An investment into solar energy provides a tax savings, but perhaps more importantly, is an investment into an expense-reducing asset.
Commercial property owners receive similar benefits as was described for the individual taxpayer. The IRS offers a similar 30% tax credit under the Investment Tax Credit (ITC). Again, this credit reduces the business owner’s taxes directly by 30%. Similar to the residential credit, this credit is set to phase-out over the next 4 years. Commercial property owners also receive a credit from the utility company. Depending on the size of the system, the credit for commercial properties is either $.07 or $.05 per kWh generated.
Unlike residential homeowners, commercial property owners can also take advantage of depreciation on renewable energy equipment. This equipment is also eligible for 100% bonus depreciation under the Tax Cuts and Jobs Act of 2017. Between the 30% credit, and the bonus depreciation, it is common for business owners to receive 50% of their investment back within the first year. Local banks are also coming up with unique loan programs for small businesses, where they can use the tax credit, bonus depreciation, and energy savings to payoff the loan. Once paid off, the business owner realizes a direct savings in their utility costs!
Conclusion
From the valuable sessions at the Washington DC conference and in my conversation with other conference goers, I learned there is a lot of money being invested in renewable energy in 2019. There as been significant investment on both coasts and other parts of the country for many years. The constant increase in utility costs and desire for clean energy is bringing these technologies to the rest of the country. With the various factors discussed in this article, there is no better time than 2019 to make an investment in renewable energy.