Wednesday, March 28, 2018

Solar Credits and Solar Sales People

There is currently a great Federal Credit for Solar panels.  You basically get 26%** of the cost of a system back as a tax credit.  Some states have a credit as well: MA gives you up to $1000 and SC gives you 25% of the cost as a couple examples.

Solar sellers take advantage of this to help them sell systems, often without disclosing incredibly important details about the credits.  Some do this because they don't know, others do it intentionally.

I prepare taxes in South Carolina, so I'm going to give an example based on a recent client to illustrate the problem:

The client had a Proposal for a system, about $30,000.  It then listed the Federal Credit of $9000, then the SC credit of $7500 and the Net System Cost of $13,500.*  Here's the problem: Once your taxes get to zero, you have to wait until the next year to get the rest of the Federal Credit - sometimes even longer.  Some people will NEVER get the full credit.  Worse, SC only lets you eliminate HALF of your tax liability with the credit.  This client, due to age and income, has ZERO SC tax liability and will NEVER get ANY of the $7500 the salesman claimed.  Luckily he'll get the Federal in 2 years.

Worse yet, many companies sell a loan with a very attractive rate, but a balloon payment equal to the Federal and/or State credit due in May of the following year.  They say, "Don't worry, you'll have the credit on your refund to pay it!"  But you run out of tax liability, and you can't make the payment, so your interest rate SKYROCKETS.  Fraud, maybe.  Deceptive, Hell YES.

Be careful.  ALWAYS talk to the person who prepares your taxes so they can analyze how long it is likely to take you to get the full benefit.  NEVER take the word of a salesman on how your taxes will work!

*There was an asterisk to some tiny fine print that said basically that not all homeowners will get the full credit in the first year - nothing about the possibility of not getting the credit.
**This was 30%, as in the example but goes down on a schedule that the IRS continuously modifies.

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