Get Answers to Your Customers’ Questions About Federal Tax Credits
The federal tax credit is one of the most important incentives for home solar adoption, reducing the cost of going solar by up to 30%. Since the typical homeowner that goes solar with Mosaic pays about $30,000 for a 7 kilowatt solar installation, that means savings of up to $9,000—quite a nice bonus!
However, as with most government programs, taking advantage of this incentive isn’t always a straightforward process. Here’s how to be prepared to answer some of the most common questions from your customers.
Who qualifies for the tax credit?
The federal tax credit is available to homeowners who own their own solar panels—that means that they can’t receive the tax credit if they rent their home or lease their solar through a power purchase agreement (PPA) or similar contractual arrangement.
How much is it worth?
The tax credit is worth 30% of the total cost of a residential solar installation, including all equipment as well as labor costs, for systems installed by December 31, 2019. After that it will drop down to 26% for systems installed by December 31, 2020, and to 22% for systems installed by December 31, 2021. Systems installed January 1, 2022 or later will not be eligible for any credit.
The actual amount of the tax credit a homeowner can receive will depend on how much tax they pay in the year they install the system, plus the following year (since the credit can be carried forward up to one year).
But if a homeowner doesn’t pay much in income taxes, then they may not be able to receive the full value of the credit. It’s important to make sure your customers are aware of this potential limitation early in the sales process so that there are no misperceptions about the ultimate cost of their solar installation.
How does the credit work with a Mosaic loan?
Mosaic loans are structured so that if they use the federal tax credit (or other savings) to pay down their loan balance by 30% within 18 months, they’ll lock in a low monthly payment for the duration of the loan. If they pay off less than 30% after 18 months, their monthly payments will be readjusted upward depending on the percentage of the loan remaining.
Will the new presidential administration impact the Federal Tax Credit?
Fortunately, the current tax credits were extended on a bipartisan basis by Congress at the end of 2015 and continue to enjoy strong support from both sides of the aisle due to the jobs and investment that renewables have generated in both red and blue states nationwide.
The future of federal renewable energy incentives is never guaranteed however, so the sooner your customers make the decision to go solar, the sooner they will be assured of receiving the full value of their tax credit.
KEEP IN MIND: We’re solar people, not tax people, so we don’t give professional tax advice—and neither should you. Anything you read on this page is merely an example and may not be appropriate for your customer’s unique financial situation. Please advise them to consult a tax professional before filing their tax credit.