Here’s How to Bring Solar Costs Down to Earth
Feb. 21, 2017 — Incentives and tax credits can cut upfront costs by 80 percent.
Electricity is a big line item on every co-op and condo board’s budget – especially in New York City – but you can trim your electricity bills by mounting solar panels on your rooftop. It may seem surprising, but as of December 2016, the city’s solar installations were able to generate more than 78 megawatts of electricity, enough to power some 10,000 homes. And with current incentives and tax credits, going solar is surprisingly affordable. To top it off, there are numerous innovative financing models.
“However, those incentives are going to decline in coming years, so it pays to do it sooner rather than later,” says Noah Ginsburg, the director of Here Comes Solar at Solar One, a nonprofit initiative that assists building owners, including co-op and condo boards, to implement solar projects.
Installing solar panels on your building’s roof is just like any other investment. There is an upfront cost, but over time you get your money back, eventually earning a return – in this case through reduced electricity bills and tax incentives. The cost can be reduced by as much as 80 percent, thanks to government incentives and tax credits. Among them:
Federal investment tax credit. Building owners are eligible for a credit worth 30 percent of the installation costs. Co-op shareholders and condo unit-owners are eligible for pro-rated shares of this credit; if the amount exceeds an individual’s federal income tax liability the year the system was installed, it can be carried forward to the next year. The 30 percent rate is available for projects that commence construction before the end of 2019. The credit then steps down to 26 percent in 2020 and 22 percent in 2021.
It can be challenging for boards to distribute the tax credit equitably among residents, especially in multi-family dwellings with retirees or veterans who don’t pay sufficient taxes to take full advantage of the credit. “One possible way around that is for the co-op or condo to take the credit if they have the tax liability to do so,” says Ginsburg. “In that scenario, boards won’t have the headache of pro-rating, and residents don’t have to bother with paperwork and filing forms on time.”
New York State tax credit. Residential building owners who install a system are eligible for a tax credit of up to 25 percent of the installed cost of systems no larger than 50 kilowatts, or about $40,000 for a 50-kilowatt system. As with the federal investment tax credit, co-op and condo residents can receive their proportionate share of the state credit, but the federal government may consider the state tax credit taxable income.
New York “sun” incentive. New York State’s Sun Initiative provides incentives of roughly 15 percent of installation costs, reducing the upfront cost of the solar energy system to the building. The money goes directly to the solar installation company, which is required to pass along all of it to customers.
Sales tax exemptions. New York State grants an exemption from sales taxes for the purchase of residential solar systems; New York City grants a similar exemption.
New York City property tax abatement. Building owners who go solar before January 1, 2019 are eligible for a four-year property tax abatement of five percent per year of the installed cost of the system (after the New York Sun Initiative). The abatement, however, may not exceed a building’s property tax liability for any given year.