The Basics of Solar Power Tax Credit for Commercial Real Estate

The Basics of Solar Power Tax Credit for Commercial Real Estate

Want to save on your solar installation? Find out the basics of solar power tax credit for commercial real estate and how solar tax credits can help. Learn about available incentives and claim your credits.

What’s the solar power tax credit that owners should be aware of right now?

After you’ve completed solar installation, you can claim your credits. Right now, you can claim both federal and state solar tax credits in many US states. To see what’s available in your area, you can find an interactive map of state incentives here. You can also find an updated list of solar programs for 2020 here.

For the federal tax credit, 30% of the total out-of-pocket system cost will be credited on your federal taxes. Your out-of-pocket cost is the gross system cost minus utility rebates. And, if you don’t use all of your credit in the first year, it will rollover. There’s no cap to the amount of tax credit you can receive!

In addition, the State of Iowa allots $5 million annually in tax credits to support solar adoption. The Iowa solar tax credit is worth 15% of the total system cost. However, it will begin to sunset alongside the Federal Tax Credit beginning in 2020. 

Similarly to the federal tax credit, if you don’t use all of your Iowa solar tax credit in the first year, it will roll over to the next year. But there is a cap on the Iowa tax credit of $20,000 for commercial installations.

What are the qualifications for this credit?

For the most part, it’s very easy to qualify. In most cases, the process starts with a Renewable Energy Consultant visiting your property or business site. They’ll determine the size and type of array that would work best. In some cases, the property is a poor fit (i.e. off the grid, shady, no room). In these cases, solar probably isn’t a cost-effective decision.

What’s the process for going through this application and approval process?

To qualify for your federal or state solar tax credits, you’ll first need to install the system. Keep track of all your expenses, including installation and equipment costs. As long as you own the system and owe taxes, you should qualify for the credits. File IRS Form 3468 to claim your commercial energy credit. Follow your state’s instructions to file for your state credit—it may vary depending on your location. You may also need to include the information on your regular tax forms—your tax specialist will know what to do. 

What percentage of commercial buildings have adopted solar panels? 

Unfortunately, it’s hard to know. The Iowa Solar Energy Trade Association has attempted to map it out, but have not completed a full survey. However, we suspect that there are many more that haven’t been reported. At any rate, the growth of the industry is exciting!

What sort of savings can a building owner expect to see once the panels are installed?

When you invest in solar arrays, you will probably see payback in 3-7 years. Also, note that savings vary based on several factors:

  • size of the installation
  • location (how much sun it receives) 
  • utility company rates
  • and utility company policies.

How do you break down the savings and expenses for solar panels?

First, we take the time to assess your situation and property. We’ll also take into account your energy usage and goals. Next, our custom solar proposals lay out all the details in an easy-to-understand format. In addition, our proposals include a picture of the location, costs, what’s included, savings, and the value of incentives. 

In order to quickly calculate your own savings and expenses, try a solar energy calculator like this one. It can help give you a general idea of whether solar is a good idea for your business.

Solar calculators can give you a rough estimate, but a personalized estimate is always best. We pride ourselves on making solar simple, and our proposals are no different. For that reason, our knowledgeable Renewable Energy Consultants will go over the entire thing with you. We’re here to answer any questions along the way.

Can one take advantage of the solar tax credits on a commercial building if they are renting it out?

Yes. Thankfully, there are excellent tax incentives available to business owners. Solar tax credits and accelerated depreciation are two such examples. We’ve already discussed solar tax credits, but you can find more information about Solar Investment Tax Credit (ITC).

If you plan to rent out the property, you may opt to include electric in the tenant’s rent. Since solar covers part of the electric bill, it allows you to earn more revenue. Additionally, it offers a unique benefit to your tenant. The tenant saves money on their utility bill, while you invest in an asset that pays off over the years. Learn more about how you can benefit from solar as a landlord.

Are you interested in learning what STRATAFOLIO has to offer around asset management and analytics? Get in touch with us today to arrange a consultation or to see a demo of our product. We’re happy to answer any questions you may have to help you with your real estate portfolio.

The Solar Power Tax Credit for Commercial Real Estate
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The Solar Power Tax Credit for Commercial Real Estate
Does solar power make sense for your commercial building? Learn how to evaluate your location and the potential savings and tax credits available.
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