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Going Solar in New York – A Tax Guide

solar tax credit

New Yorkers pay some of the highest electricity rates in the US. In 2020, the average payment hovers around 19 cents per kWh. Yet it’s not just a financial burden New York residents are under – the environmental cost of trying to produce the electricity the state needs is monumental.

Which is why many New York property owners are considering clean energy installations, especially solar systems.

Yet making the jump to clean energy can require a large, upfront investment, that not everyone’s up to. Thanks to a host of federal and state tax benefits however, going solar in New York City and Long Island can be less expensive than you think. Read on for a short guide of the current, 2020 tax benefits available to New York City and Long Island residents who decide to invest in solar.

Tax credit vs. Tax deduction

Before going into the specific tax breaks, it helps to understand the difference between the types of tax incentives available to solar investors. There are two – a tax credit, and a tax deduction.

A tax deduction reduces the taxpayer’s liability – or the total overall amount you’re being taxed on – meaning it’s worth a percentage of its monetary value. A tax credit, on the other hand, is directly deductible from your final tax bill, meaning its value is 100% savings.

New York State Solar Tax Credit

The New York State Solar Tax credit is a tax credit that’s available to New York state residents who are installing a solar system on their primary residence. The credit amounts to 25% of the cost of the solar system and installation – or $5,000, whichever is lower. If you don’t have a high enough tax burden, this credit can roll over for the next five years or until its used up, and unlike some of the other tax incentives, the New York State Solar Tax Credit is available regardless of whether you purchase or lease your solar system.

Federal Solar Tax Credit, aka the Investment Tax Credit (ITC)

The biggest tax credit available on New York State solar installations in 2020 is still the Federal Solar Tax Credit, also known as the Investment Tax Credit, or ITC. The ITC allows you to subtract 26% of the cost of installing a new solar system from your federal taxes. Both residential and commercial solar systems are eligible.

While you can roll over the tax credit if you don’t have enough tax liability to claim all of it, the installation must be in 2020 to be eligible for the 26% credit. In 2021, the credit will drop to 22% in 2021, and in 2022 and onwards only commercial solar systems will be eligible for a 10% credit – the residential credit will go away entirely.

This is a buyer’s only tax credit – leased systems do not qualify

Megawatt Block incentive

New York’s Megawatt Block incentive, based off of a similar tax incentive in California, offers financial incentives per-watt for homeowners installing solar in regions with few solar systems. As the number of solar systems in a region rises, the incentive dwindles. The Long Island region is unfortunately already closed for this incentive, however there are two remaining two zones, NYC for example, where rebates are still around 30 cents per watt for residential installations – where a 4,000-watt installation, for example, would net you a $1,200 grant in return.  

New York City Property Tax Abatement

New York City building owners installing solar on their properties are eligible for a property tax savings, on top of the aforementioned credits The City offers a four-year tax break equal to 5% of the system’s cost per year, for a total of 20% over four years. The fine print? The abatement cannot exceed the total property tax liability for any given year, and is capped at $62,500 per year, or $250,000 in total.

Net Metering

While not quite a tax break, Net Metering is one way that New York State helps solar investors to mitigate the cost of a new solar installation. Net Metering effectively allows you to sell any excess energy your solar system produces back to the grid, receiving credit on your electric bill for the excess contributions. While it might see any cash-in-hand for this incentive, it can bring your energy bill down to nearly-zero, providing you with hundreds (or more) in savings a year.

Sales tax exemption

New York State offers another tax benefit for solar installations – a 100% sales tax exemption for both solar electric and hot-water systems. That means you’ll pay 0% sales tax on all new solar installations – which can amount to huge savings. This exemption is actually more of a refund – to benefit, you’ll need to submit a sales tax exemption certificate following your purchase.

If you’re looking to install a solar system in your New York property, contact the experts at Harvest Power to learn what sort of system is perfect for your property, and what tax credits and financial incentives you might be eligible for to make your clean energy investment possible.

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