Your installer will recommend the appropriate-size system for your needs based on your annual electricity usage and your suitable roof space. More on pricing.
Tax credits can significantly reduce the net cost and payback period of a rooftop solar system. There is an additional incentive available if you own a rural small business (see “Other Incentives” below).
Your installer can also tell you about a variety of loan options, some of which are specifically tailored for solar. Self-Help Credit Union offers solar loans that make it easy to lower the upfront costs. By the end of 2024, the NC Clean Energy Fund (our state green bank) may have funding from the Inflation Reduction Act (IRA) to provide especially favorable solar loans. Other financing options are discussed below.
Tax Credits Explained
The 30% Federal solar tax credit was being phased out, but the IRA passed in 2022 brought it back and extended it through 2033. If you were expecting a 26% reduced credit for installing solar in 2022, you will now be eligible for the full 30% credit when you file your 2022 taxes.
Other helpful provisions of the IRA will help those previously unable to take advantage of the tax credits:
- nonprofits can receive direct payment of the 30% tax credit even though they do not pay taxes
- additional bonus credits are available to certain projects that use a high level of domestic content or are located in low-income areas, near retired coal plants, in areas with high fossil fuel employment, or on affordable housing (details here), and
- for-profit businesses that do not owe enough taxes to use the entire credit can sell part or all of it to another business.
For businesses, payback is further accelerated by taking advantage of the bonus depreciation offered on the Federal tax return. Also, the IRA established some additional credits for qualifying commercial or nonprofit projects that are installed in a low-income area or in an “energy community” such as towns that housed coal plants, and for meeting domestic content requirements. For a project that meets all these and certain other requirements, the total tax credit could be as much as 70% of the cost of the system.
NOTE: This information is provided as a guideline only. Consult your tax advisor for complete information applicable to your situation.
A tax credit is even better than a tax deduction. You don’t just subtract it from your income – you subtract it from the amount of taxes you owe. Every dollar of tax credit is a dollar you don’t pay in taxes.
If some of the tax you owe has already been paid in the form of payroll withholding, you may get some of your withholding back as a refund. If you can’t use up the entire credit the first year, you can claim the remainder in the second year.
You will claim the tax credits when you file your taxes, but you may be able to receive some of the benefit right away by having your employer reduce the amount of tax withheld from your paycheck based on your new estimate of how much tax you will owe.
As mandated by the 2017 energy bill (HB589), Duke Energy is offering rebates on solar systems, but only through 2022. Ask your solar installer if it’s too late to apply. The rebate amounts as of July 2021 are:
- 30 cents/watt for commercial customers
- 40 cents/watt for residential customers
- 75 cents/watt for nonprofit customers
Any customer of Duke Energy who installs solar is eligible to apply for the rebate, but certain restrictions apply. A commercial or nonprofit system receives the rebate only on the first 100 kilowatts, a residential system only on the first 10 kilowatts.
The amount of solar that receives the rebate each year is limited, with a certain set-aside for nonprofit customers. You may have heard that the rebates sell out quickly each year. This is true for the residential and commercial rebates, but the nonprofit rebates have not been used up, so it is easy to get those. It is very important to understand how to claim the rebate. Ask your installer for instructions. As of the July 2021 application period, rebates will be assigned on a lottery basis to those who have applied. (Again, this is not a concern for nonprofits, where plenty of rebates are available.)
Prices for solar systems have come down drastically in recent years. Your price will depend on the size and shape of your roof, your electric usage and other factors.
The cost of solarizing an average-sized home in the 2016 Solarize the Triangle program was in the $15,000-$20,000 range.
Farms and rural small businesses may qualify for a 50% grant from the USDA’s Rural Energy for American Program (REAP).
In 2016, we partnered with Self-Help Credit Union to create a novel loan that made it easier for homeowners to lower their upfront costs. Here is how it worked. Check with Self-Help to find out what loans are available now.
Consider an average 5-kilowatt solar system costing $17,500. [Or probably less. Prices are dropping all the time and this is a 2016 pricing example.] You can get started with a 20% down payment, which is about $3,500 for this example. You can borrow the remainder using home equity.
At tax time, you receive tax credits worth 26% of the installation cost (dropping to 22% in 2023). You can use these funds to pay down a portion of the loan.
This typical example provides $700 per year in electricity savings. Also, interest on your loan can be deducted from your taxes. These savings offset your loan payment.
As electricity prices go up, your savings increase. Over the 25-year lifetime of the panels, the total benefits (sum of savings minus all loan payments) is expected to exceed $10,000. Not a bad return on your $3,500 initial investment.
If you decide to sell your home, it is easy to recoup your down payment and any remaining loan balance. Solar homes sell more quickly for more money.
When you are buying all of your electricity from the grid, each month you spend money and never see any return. When you own a home solar power plant, each month you are saving money on your electric bill and using the savings to improve the value of your home.
Self-Help Credit Union’s solar loan factsheet has more information. [This was a 2016 program. Inquire at Self-Help to see what loans are available now.] To start a loan application, contact Steve Reardon at Self-Help Credit Union: (919) 956-4669 or Solar@Self-Help.org.
Many other lenders offer loans as well. If you need to take out a loan, your installer will help you find the best deal for you.
In addition, the North Carolina energy bill passed in 2017 (HB589) provides for solar leasing. Check out NC WARN’s Solar & Storage Quick Facts for a list of leasing companies. (Unfortunately, as of March 2020, the leasing companies offered leases only to commercial and nonprofit customers, not residences.)