Finding your way through the maze of solar tax incentives

When you consider the benefits of installing solar panels on your home or business, the list goes on and on. Money savings. Cleaner energy. Owning your power source. Among those is a phrase many people are familiar with, but the application is sometimes a little hazy.

Tax incentives.

Thanks to federal investment tax credits opened in 2006, solar customers are eligible for a 30 percent federal tax credit but not everyone understands how that actually works. And even fewer are aware that the 30 percent tax credit might just be the tip of the iceberg when it comes to saving on your solar array.

Legend Solar installers set panels on a roof in Dammeron Valley, Utah. "Companies providing this kind of solar tax service... are vastly superior to solar companies who don’t offer this kind of thing," Warburton said.In order to ensure Legend Solar customers have access to the most accurate information with regard to tax incentives, Legend Solar has teamed up with American Wealth Financial, one of only handful of financial companies that are members of the Solar Energy Industry Association (SEIA) — a group that truly understands the solar industry and its customers.

“Solar is really, really complex,” says Jeremy Warburton, a principle owner at American Wealth Financial. “There’s no uniformity from state to state or even utility company to utility company.”

In order to make sense of the variances between each utility’s net metering agreement and the interconnection agreements, American Wealth Financial is offering Legend Solar customers a free assessment on their specific agreement with the utility company to determine which tax incentives they qualify for and what other benefits they might be eligible to receive.

“It’s a huge benefit,” Warburton says.

Potential hidden benefits

After taking an in-depth look at how solar actually works, experts at American Wealth Financial discovered that, depending on the wording of the interconnection agreement, some solar customers are actually selling power back to the utility company, while others are getting a subsidy for the excess power they generate. If the net metering agreement is worded in such a way that indicates a sale is taking place, those customers should claim the income made from this sale because it could lead to an opportunity write off thousands of dollars on their taxes.

“In some cases, they can write off the entire value of the solar equipment, less half of the tax credit,” Warburton says. “That’s 85 percent of the panels that can be written off. That’s awesome.”

The language that makes this possible is known as a “power purchase agreement” or PPA language but there are rules that apply so it is important to deal with a tax professional who has an intimate knowledge of the solar industry and the transactions with the utility.

Although reporting what is likely only a few hundred dollars of income from the sale of a customer’s power to the utility company may be counter-intuitive to some people, the benefit may greatly outweigh the reported income.

“If you get $10 from your grandma for your birthday, most people aren’t going to report that,” Warburton says. “But if reporting that meant you could write off the entire cost of Grandma’s house, you definitely would.”

Find out for yourself

One of the biggest reasons for the boom in solar right now is the tax incentives, Warburton says, but the tax incentives are complex. It’s just the nature of tax code. Having a company, like Legend Solar, who is concerned not only about helping you power your home in a more efficient way, but is also looking out for your wallet at the same time is paramount when determining who to turn to when you decide it’s time to go solar.

“Companies providing this kind of (solar) tax service to make sure customers are filing correctly are vastly superior to the solar companies who don’t offer this kind of thing,” Warburton says.

Whether you use American Wealth Financial or another company, Warburton says anyone interested in solar should consult with a CPA who is familiar with solar and with net metering.

Lisa Larson is a freelance writer covering a wide range of topics. Read more of her work at and follow her at and on Twitter @LisaGLarson

Category: How does solar power work?, Residential Projects