Taking Advantage of Solar Incentives

The government, both on the state and federal level, is putting a considerable amount of effort into promoting energy efficiency in American homes and businesses. One of the ways they’re doing so is by offering incentives for individuals and companies to upgrade their properties with the installation of energy conservation systems, which includes solar-thermal and solar electric systems. Solar incentives vary from state to state, but regardless of where you live, there’s likely to be an incentive program that fits your needs.  Here are some of the basic solar incentives that are currently offered and how you can take advantage of them.

Section 136

Section 136 of the U.S. Code says that “energy conservation subsidies provided by public utilities” are non-taxable. The term “energy conservation measure” is used throughout many of the laws pertaining to solar incentives offered by the federal and state government. It is a term that included solar incentives and also any modification designed to reduce the consumption of electricity or natural gas. Buildings covered under this section include apartments, houses, condominiums, mobile homes and similar residential businesses.

Energy Efficient Mortgages (EEMs)

If you’re a homeowner, you can take advantage of energy efficient mortgages (EEMs) to finance the installation of a brand new solar energy system in your house. The federal government is providing these special loans to the public via the Federal Housing Authority (FHA) and the Veterans Affairs (VA) loan programs. An EEM basically credits the energy efficient upgrade in the home’s mortgage itself, stretching the loan’s debt-to-income ratio, thus allowing borrowers to qualify for larger loans and giving them a cost-effective way to make their homes more energy efficient.

There is also an incentive for lenders here. Those who show that they know how to write EEM loans and give out a certain amount of them per year can use the federal Energy Star brand to advertise themselves as Energy Star partners who can provide clients with EEMs.

Tax Deduction for Commercial Buildings

The Energy-Efficient Commercial Buildings Tax Deduction is part of the Energy Policy Act of 2005, and it provides an incentive for companies to upgrade their commercial buildings with new energy efficient systems including solar energy upgrades. The incentive was extended through 2013, and it lets companies receive a tax deduction of $1.80 per square foot on new or old properties by installing energy efficient upgrades that decrease the building’s net energy consumption costs by 50% or more. Now, if a building does not meet the 50% mark, it can still qualify for a partial tax deduction. If, for example, a building installs solar panels that reduce energy costs by at least 16.66%, it can still qualify for a deduction of $0.60 per square foot. 

Solar Incentives in the Federal Stimulus Package

The American Recovery and Reinvestment Act of 2009, more commonly known as “the stimulus package”, allows for the modification or extension of existing renewable energy incentives. In terms of solar incentives, the ARRA extends the duration of 30% tax credits for solar energy by eight years.

Assembly Bill 811

The provisions of Assembly Bill 811 (AB 811) are part of the measures taken by the state of California to meet the goals set by the Global Warming Solutions Act of 2006. Other states have takes different measures to try to live up to the Act; California’s AB 811 is presented here as one example among many of the way states are using financing methods that reward homeowners who invest in cleaner energy for their homes.

AB 811 essentially authorizes cities and counties in California to designate areas where home owners who want to install energy saving systems in their homes can enter into a special financing program. To be eligible, homeowners must install energy saving upgrades that are permanently attached to the property (upgrades such as solar panels, for example). The financing program gives homeowners access to low-interest loans, which can be repaid as an item that appears on their property tax bill. In this way, the program lets borrowers avoid having to take on the weight of the upgrade’s initial investment cots. Furthermore, the loan is attached to the upgrade, which means the payments get passed on to the new owners if the property gets sold and responsibility for the loan gets transferred at escrow. Right now, interest rates for AB 811 loans are at 7% amortized over 20 years.

Resources:

http://www.dsireusa.org/incentives/index.cfm?State=US&ee=1&re=1

http://www.energy.gov/taxbreaks.htm