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 makes it easy to lower the upfront costs. Other financing options are discussed below.
Tax Credits Explained
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.
Unfortunately, the North Carolina solar tax credit (which paid back 35% of the installed cost of your system), expired on December 31, 2015, so it is too late to take advantage of that tax credit. (For those whose solar was installed before Dec. 31, 2015, your state credit can be used over five years, but can only account for 50% of your tax bill in any one year.)
The Federal solar tax credit is being phased out. In December 2020, it was extended and is now available through 2023. From now through the end of 2022, it pays back 26% of the installed cost of your system (assuming you pay enough tax to use it up). The credit drops to 22% in 2023. After Dec. 31, 2023, the Federal tax credit expires for residential customers and drops to 10% for commercial installations.
2022 Update: Clean energy provisions in the Build Back Better Act would increase and extend the tax credit, and would also make it “refundable” (payable in cash to those who do not pay taxes or do not pay enough to claim the whole credit). But that bill is stalled in Washington as of February 2022.
Click to enlarge.
Click the image at right to enlarge this imaginary tax return for a homeowner who spent $17,000 on a solar system. This is page 2 of form 1040. You can see that the credit is subtracted from the total tax owed. If some of that tax 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.
For businesses, payback is further accelerated by taking advantage of the bonus depreciation offered on the Federal tax return.
Reminder: Individual circumstances vary and not everyone is able to take full advantage of the tax credits. Please consult a tax professional to learn if the solar tax credits apply in your situation.
Rebates
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.)
Pricing
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.
Other Incentives
Farms and rural small businesses may qualify for a 25% grant from the USDA’s Rural Energy for American Program (REAP) (additional information on REAP is available at farmenergy.org.
Self-Help Loan
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.
Other Financing
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.)