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Financial Incentives for Going Solar

Washington has long been an advocate of sustainability and energy efficiency. To help its residents and businesses take advantage of the state’s solar and other renewable energy resources—which include wind and geothermal—the state and many local utilities offer residents and businesses numerous incentives, including tax breaks, net metering, and production credits.

There are currently several great incentives for solar which provide an 4-6 year break even point for typical residential and commercial systems.

How to Apply for Solar Tax Credits

  • Fill out IRS Form 5695 and submit it with your annual federal taxes.
  • Add credit from Form 5695 on residential energy credit line of Form 1040.
  • Save all project receipts.

Federal Tax Credit (30% Credit Expires December 2019)

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

The maximum allowable credit, equipment requirements and other details for solar electric property are outlined below:

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022
  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

State Production Incentive (Expires in June 2020)

Utility Incentives vary by provider.  Western Solar Inc is a pre-authorized solar contractor with Puget Sound Energy, Snohomish PUD, Seattle City Light and City of Bellevue, qualifying you for additional cash rebates.

The Washington Production Incentive is paid by the utility for everything that is produced by the solar system.  The credit ranges from $0.15 to $0.54 for every kilowatt hour (kWh) produced, which is determined by how much of the equipment is manufactured in Washington State.

Incentives for different equipment combinations:

  • Made-in-Washington panels and inverter(s): $0.54 per kWh
  • Made-in-Washington panels with out-of-state inverter(s): $0.36 per kWh
  • Out-of-state panels with made-in-Washington inverter(s): $0.18 per kWh
  • Out-of-state panels and inverter(s): $0.15 per kWh

Net-Metering (No Set Expiration)

Utility customers who generate their own electricity and are connected to the utility’s distribution grid offset electricity that would otherwise be purchased from the utility. There may be times when the customer’s system generates more electricity than the home needs during the day, week or month. In these cases, a credit is issued to the customer’s account for the excess power, which can be used during the following month(s) until the annual true-up. In other words, the customer will only pay for the energy that the utility provides.

Benefits of Net-Metering:

  • Creates a reduction in electricity bills.
  • Ensures that the customer’s system is connected to the utility’s grid, so even during cloudy days, there is always a dependable source of electricity without needing batteries.
  • Your participating utility credits you at retail rate for power, so as the price of power goes up, the value of your net metered solar increases as well.

For further details, visit the Database of State Incentives for Renewables & Efficiency.

100% Sales Tax Exemption (Expires June 2018)

The Renewable Energy Sales and Use Tax Exemption provides a 100 percent sales and use tax exemption on purchases of machinery and equipment used directly in a solar energy system capable of generating 10kW of electricity or less. Installation charges are also exempt. Both state and local sales tax are included in the exemptions. These exemptions are extended to June 30, 2018.

The exemption provide a 75 percent refund of the sales and use tax paid on solar energy systems capable of generating more than 10kW of electricity. The buyer pays the total amount of tax due on the purchase of the machinery, equipment, and installation. The buyer may then apply to the Department of Revenue for a refund of 75 percent of the state and local sales taxes paid. The refund program for systems over 10kW has been extended to January 1, 2020.

For further details, visit the Database of State Incentives for Renewables & Efficiency.