Utilizing Every Opportunity
There are some great incentives available to new solar customers. In addition to being an expert in solar energy, we are knowledgeable and equipped to help you take advantage of all the incentives available to you and minimize your financial investment.
Illinois SREC Program
Illinois’ SREC, also known as “Illinois Shines” is the brand name of the Adjustable Block Program, a state-administered program for new solar photovoltaic (“PV”) systems. The program provides payments in exchange for 15 years of Renewable Energy Credits (“RECs”) generated by new PV systems. These payments, made by Illinois utilities, vary depending on the system’s size and where it is located. Participating in Illinois Shines is the same thing as participating in the Adjustable Block Program.
Federal Tax Credit
In addition to net metering and SRECs, solar system owners are also eligible for the Federal Investment Tax Credit, or ITC, if you buy your own solar system outright.* The tax credit amounts to 30% of the cost of purchasing your solar system, but only after deducting the value of your state rebates.
Net metering is one of the best state incentives available for solar system owners and could cover 100 percent of your energy needs. It’s pretty simple: if your solar system produces more energy than you need, you’ll receive credits on your utility bill so that you can use when you need to use energy from the grid (for instance nighttime or on particularly cloudy days). Simply stated, you can “save” your solar energy for when you need it most. Plus, unlike other residential solar companies, we won’t charge you if your solar panels overproduce.
MACRS Depreciation is a tool allowing your business to deduct 85% of the cost of a new solar array over a five year period. This deduction helps reduce your total tax liability (saving you on your tax bill) and can significantly reduce your payback period.
Solar equipment, such as those installed in Iowa and other states, is eligible for a cost recovery period of five years. The amount of the array that you will be able to deduct is found by reducing the appreciable basis by half of the current available Investment Tax Credit (ITC). Currently, the ITC is 30%, so the total appreciable basis must be reduced by 15% percent. This leaves 85% that can be deducted over a five year period.
In general terms, depreciation refers to the loss of value over a set period of time for an object you purchase for your business (for a specific use). Because this is a business expense, you are able to deduct this lost value from your taxable income, provided the object was used for your business.
The MACRS Depreciation is NOT a tax credit, as it will directly decrease the amount of income that is taxed rather than a decrease in the amount of tax you have to pay. However, a lower tax liability will usually mean a lower amount of owed taxes. MACRS Depreciation can be used in conjunction with applicable tax credits.
There is currently a bonus depreciation that allows you to depreciate a larger percentage in the solar array’s first year of service. The remaining percentage will be depreciated under the normal MACR’s schedule. The bonus depreciation is only available for a certain amount of time.
Array Installed in 2018 – 40% Bonus Depreciation
Array Installed in 2019 – 30% Bonus Depreciation
MACRS Depreciation, alongside available tax credits and other financial incentives, can significantly reduce the payback period of your solar array. We often see payback periods of 2 and a half to five years, which leaves decades of free power for the array owners.
USDA REAP Grant
The REAP program provides grant funding for for-profit entities of up to 25% of project cost or loan guarantees up to 75% of the project cost. REAP is run by the US Dept of Agriculture through their state offices. Grants are awarded on a competitive basis, for differing amounts of the total system price, up to a maximum of 25%.