For-profit property owners can cover a large share of a solar electric system’s cost through incentives. As incentives covering as much as 75% of a system’s cost will reduce or disappear soon, the economic returns of a solar project can be maximized by moving forwards in 2020. Here are four ways to leverage disappearing solar incentives:
1. Lock in the Federal Solar Investment Tax Credit (ITC)
Incentive: The ITC covers 26% of the overall solar PV system cost. The ITC flows through to personal income taxes, so property owners can directly benefit by building solar on their properties.
Disappearing Act: For commercial properties, the incentive diminishes to 22% of system cost in 2021 and 10% in 2022.
How to leverage: A property owner can capture the solar tax credit by completing the project in 2020. Alternatively, s/he may ‘safe harbor’ tax credit value by placing a 5% deposit on materials by December 31, 2020. The tax credits will be applied to the 2020 tax returns, assuming the project is placed in service this year. Should the project be completed after 2020, the tax credit will be applied against the tax year in which the project is placed in service.
Image source: https://www.seia.org/initiatives/solar-investment-tax-credit-itc
2. Capture the Expiring NYC Property Tax Abatement
Incentive: New York City has a solar property tax abatement covering 20% of the project cost, minus any grants contributed to the project.
Disappearing Act: The tax abatement expires March 15, 2021.
How to leverage: A property owner needs to close out all electrical and building department permits to submit an application to NYC DOB for the property tax abatement. By completing a project’s construction by year-end 2020, sufficient time is allowed to apply to DOB for the tax abatement.
3. Get a (nearly) free solar system with your new roof
Incentive: New roof layers can qualify for the ITC so long as they are a functional component of the solar PV system. Moreover, the cost of a roof replacement is eligible for the NYC Property Tax Abatement, further reducing the net cost of your new roof. In addition to the ITC and PTA, the solar PV system, as well as critical roofing components, can be fully depreciated immediately.
Disappearing act: The roofing benefits are only as good as the solar ITC and PTA – so they diminishing after 2020!
How to leverage: Fold solar into your most pressing roof replacement jobs. Also consider adding a new layer to roofs where the useful life is under five years, to cover much of the project costs through solar incentives. Be sure the roofing costs qualify under the solar tax credit, which has certain standards that must be met, by working with solar and tax credit professionals.
4. Monetize the NY State NY-sun solar grant
Incentive: The New York State Research and Development Authority (NYSERDA) provides a grant to off-set the cost of solar, through its NY-Sun program. For example, in New York City the grant covers appx. 30% of the cost of a typical project on multifamily housing.
Disappearing Act: The NY-Sun grant program is set up in tranches, which reduce after a certain amount of solar is built in zones across New York State. In New York City, for example, the value of the incentive just reduced from .60/watt to .50/watt in the last month; the incentive has completely run out on Long Island.
How to leverage: Moving forward in the first half of 2020 can help lock in the current value of the grant before it goes down further.