The 411 on PV-system Tax Credits
With the tax season wrapping up, many Hawaii residents have realized the benefits of purchasing a PV system this past year. The state and federal tax credits have proven to be great incentives for those residents, and could possibly benefit you next. But how can they help you and how does it all work?
Understanding the tax credits can be challenging, and it is best to seek a CPA or tax professional for expert advice.
The following is information that will help you understand tax credits:
First of all, tax credits are not tax deductions. Unlike deductions, which take money off your taxable income and vary in value depending on what your income is, a credit reduces your tax bill by a set dollar amount.
The federal tax credit is very straightforward and simple to understand. The tax credits are for 30 percent of the cost of the system, with no cap based on how much you paid initially or how large your system is. Simply put, if you spent $10,000 on your PV system, you will be eligible for a tax credit of $3,000. Unused tax credits also can be rolled over into the following year if not exhausted, but presently they are only eligible until 2016.
The state tax credit is a little more complex, as there are limits on what you can claim. The state grants a 35-percent tax credit off the cost of your system, with a maximum of $5,000 per circuit. This is where it gets a little tricky. You might ask yourself, what defines a circuit? PV panel manufacturers set limits as to how many panels can be strung together, and this will determine how many circuits you have. An experienced PV company will have no problem helping you determine how many circuits you have, and can provide you with the proper documentation to back it up.
These tax credits are huge incentives for those who utilize them, but they will not be around forever. Currently, there is a bill in the state legislature seeking to lower the tax credits in future years and cap the amount of circuits. This will have an effect on future PV buyers because the tax credits will not be as beneficial.
Call EnergyPro Hawaii today at 596-2890 to get a free estimate and learn more about the state and federal tax credits. You also can visit them online at Energyprohawaii.com or on Facebook at Facebook.com/Energyprohawaii.