This credit has been lied about and otherwise abused by solar sales organizations and contractors to dupe many people. While we carefully avoid giving tax advice, we have heard some horror stories about this tax credit. Retelling them here might help someone.
How does the solar tax credit work?
That question should be asked differently. How does the solar tax credit work in my particular financial situation according to how my solar agreement is structured? That is the better way to ask that question, and it should be presented to a tax professional who is familiar with your finances. It is not information Google can help you with. It is also not information that a solar salesperson (or blogger) is qualified to relay. It is specific to you.
So, while nothing we post here should be taken as financial or tax advice, we will share with you some anecdotes we have heard that are related to the solar tax credit. We hope you get some insight from this, but for rock solid information on the tax credit, and how it applies to you, please only get that from a tax professional.
Anecdote #1
We know a solar customer who bought from a solar company that is no longer in business but was pretty big in their day. They caught his attention originally, and he agreed to have that company come out to give him a quote, mainly because they ran a short ad that stated something to the effect of, “The government will pay you to go solar. Click now to see if you qualify.”
If you’ve seen a solar demonstration, you know they impart a lot of information that the average consumer struggles to understand. It’s easy to forget that the visit started with a lie. It is also common that a solar salesperson will tell a prospect that the government will cut them a check for 30% of what they pay for solar. When it comes to lying, many of these solar sales organizations are in for a penny, in for a pound.
Miraculously, that particular customer’s system was competently installed, and he uses us for maintenance and service. Boy, was he upset come tax time and the government did not cut him a check at all though. What he was eligible for was a 30% tax credit which deducted 30% of the cost of his system from what the IRS expected him to pay. His tax burden was not big enough to take full advantage of the credit.
Anecdote #2
We know another homeowner who leased their solar. That’s a deal where a company will put panels on the homeowner’s roof and sell them that electricity at a discounted rate. It’s essentially switching power companies. In this case, this homeowner was led to believe he would get a tax credit. Nope, the solar leasing company that bought and owns the solar on his roof got the tax credit.
Anecdote #3
This one is trickier. A customer purchased a solar system for fifty thousand dollars. (Made up number for example purposes.) They purchased it from a solar sales organization that sub-contracted the engineering, procurement, and contracting (EPC) from another company. This solar owner wrote off 30% of his purchase price, the price on his contract, $50K, and got in trouble. Apparently, he was only allowed to write off 30% of what the EPC charged, not including the salesperson’s commission and the sales organization’s profit.
Let’s say of the fifty thousand total price, thirty thousand went to the EPC and twenty thousand went to profit and commissions. The customer was only eligible for a tax credit on the thirty thousand. There is no way the customer could have known.
Turns out, sales organizations don’t disclose their costs for materials and labor versus what they put on top for commission and profit to their customers. This customer got into trouble while being as honest as possible with the IRS. We wonder how many other people made the same mistake.
So, there are three to watch out for. We are sure there are many more ways this tax credit has been abused. Please, make sure you thoroughly check out a company before you do business with them. Don’t begin any relationship with a lie, much less a solar agreement, as they last for decades.
When considering a lease, keep in mind that the owner of the panels, the leasing company, is who gets the tax credit. On second thought, don’t lease solar ever. It’s a raw deal. You are just buying your electricity from a different power company that uses the real estate on your roof to house their power plant. They will also raise their rates, just like our current power companies, so what’s the point?
Know who you are dealing with. If you are speaking with someone about a possible solar installation on your home, find out if they have installers as employees in their company or are they going to hire another company to do the install for them. If they are subcontracting the work to an EPC, get the name of that contractor, and check them out on the BBB, the DBPR, and anywhere else you can. This is the company that is doing the work on whose competency your solar success relies.
Once you are sure the EPC is a solid company to do business with, cut out the solar sales organization and buy your solar directly from the EPC. We think good, legal, moral, and ethical sales organizations and salespeople provide value to prospects and customers.
One of their defining characteristics is that they stand behind the product or service they represent. If they are subcontracting the job to another company, they don’t, they can’t. You will probably save a lot of money dealing directly with the contractor too. Also, the number on your contract will match the number your accountant asks for credit on.
Still, if the tax credit is a deciding factor for you, take your initial quote to a tax professional before you sign anything and have them review it. Based on that, they should be able to tell you exactly what kind of financial benefit the tax credit will be to you. Now you can make an informed decision on solid information.
Our opinion on the tax credit is that solar is going to save you money with or without the incentive. It’s a nice little bonus, if you qualify, but the three most important reasons to go solar are independence, avoiding rising energy costs, and someday your energy expense is over. That’s our opinion, maybe an important one for you is saving the world by going green. Maybe it is raising your home’s value. Maybe it is all about lowering your tax burden. If that’s it, please consult a tax professional and keep in mind the stories above.
If you are looking for a shortcut, call us. We check all the boxes. We’ve been doing this forever (1999), have an excellent reputation in the community (Central Florida) and the industry (Solar and Energy Efficiency), our techs are all in-house employees, and we refuse to sell leases.
We look forward to hearing from you.
