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Solar Tax Benefits for 2011 & 2012

Making the switch to solar energy can be a great way to save the environment and help your clients save on utility costs. As a bonus Uncle Sam will help pay the costs! The government and state utilities continue to offer lucrative income tax credits and cash incentives to non-residential property owners who install solar photovoltaic systems.

The IRS offers a tax credit that is equal to 30% of expenditures related to solar installations, with no maximum on the credit amount. This credit will remain available for all eligible systems placed in service on or before December 31, 2016. In addition, for 2011 and 2012, the IRS is allowing 100% and 50% bonus depreciation respectively. This means your taxable income and tax brackets will dictate your direct tax savings from depreciation, but in most cases should result in significant additional first year savings.

Various state utility programs offer cash incentives as well. For example, SMUD and Roseville Electric offer cash rebates through their Expected Performance Based Incentive (EPBI) program and the Performance Based Incentive (PBI) program. In most cases, customers that install solar have the choice of picking either a one-time, up-front rebate based upon the expected performance of your system or continuous rebates based upon actual production of your system over a 5 or 10 year period. Both of these programs significantly reduce the cost of solar installations and should be secured immediately. Each program’s rebates begin to decline as the utility installation targets are met.

If your client is one of the lucky taxpayers that began a solar installation in 2011, they may still be eligible for the expired Federal Section 1603 “Grant in Lieu of Tax Credit”. This program provides a 30% cash refund of the system’s installation costs paid within 60 days of placing your system in service. This refund is in lieu of claiming the income tax credits. It is beneficial for taxpayers who do not have a large income tax liability and cannot utilize all of the tax credits immediately. To qualify for this program, the system must have been 5% completed by December 31, 2011.

Tax year 2012 still looks to be a good year for businesses. With proper planning, purchasing a solar energy system can be a valuable and cost-effective business investment. By securing Federal/State incentives and reducing current electric bills, it is possible to see a complete return on investment in 3 – 5 years. Feel free to contact me with any questions.

This article was provided by
Sherif Boctor, CPA
PSG Certified Public Accountants
Phone: 916-791-3120

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