There are a variety of incentives available in Washington State that significantly reduce the cost of a solar system – and help maximize your Return on Investment.
Federal Tax Credits
The Federal Government allows you to claim a Tax Credit of up to 30% of your total system cost on your tax return. What is more, you can roll it over, meaning that if you can’t use the full value in the first year, you can claim the remainder in the next year. There are two programs in the IRS code: The Residential Energy Efficiency Credit
in section 25D of the tax code is for individuals and is claimed on the Form 1040, and Form 5695. This credit is applicable to your Alternative Minimum Tax (AMT) as well.
For solar that is purchased and installed on a business, the Investment Tax Credit
program in section 48 of the tax code provides a 30% credit + MACRS depreciation up to 85% of the project cost, or 'basis'.
This incentive is is good through 2021 and is reduced to 26% after 2019.
A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government. The ITC is based on the amount of investment in solar property. Both the residential and commercial ITC are equal to 30 percent of the basis that is invested in eligible property which have commenced construction through 2019. The ITC then steps down to 26 percent in 2020 and 22 percent in 2021. After 2021, the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10 percent unless the U.S. Congress passes legislation to extend, increase, and/or make permanent tax credits for investments in solar by individuals or by corporations.
Commercial and utility projects which have commenced construction before December 31, 2021 may still qualify for the 30, 26 or 22 percent ITC if they are placed in service before December 31, 2023. The Treasury and IRS are currently drafting guidance which will inform solar developers of which percentage of ITC they will qualify for depending on when they started their project
Net Metering, an incentive available since 1996 and extended in 2019, is a contract that you sign with your utility allowing you to trade power with them at retail rates. When you produce more energy than you consume the excess kilowatt hours are fed into the grid and credited to your account. When you produce less than the consume, you purchase electricity from the utility. See: Net Metering Explained
Sales Tax Exemption
Washington State extended the Sales Tax Exemption for solar PV systems up to 100 kW in size in 2019 Senate Bill 5116 - the Clean Energy Transformation Act. This is in effect until 2029
Rebates, or "cash back incentives," for solar systems in Washington vary from utility to utility. Check out your utility's website to determine if rebates are available in your service area.