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Solar Tax Credits Explained
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Both the state of Hawaii and the US federal government offer generous tax credits for new solar photovoltaic system installations. The state of Hawaii also gives tax credits for solar hot water systems. These incentives dramatically lower the cost of purchasing and installing a solar system and have fueled the huge wave of interest in the last several years for solar energy in Hawaii. We thought we would explain how these tax credits work in order for you to start to understand how you can take advantage of them.

SOLAR HOT WATER

Federal Tax Credits

A 30% federal tax credit is available on the cost of equipment and installation of a solar hot water system placed into service before December 31, 2016.

Hawaii State Tax Credits

The Hawaii Energy Tax Credit allows solar customers to claim an income tax credit of 35% of the cost of equipment and installation of a solar hot water system. The credit is capped at $2250 per system.

SOLAR ELECTRIC TAX CREDITS

Federal Tax Credits

The federal government gives a 30% tax credit on the cost of equipment and installation of a solar photovoltaic system and applies to all systems placed into service before December 31, 2016.

There are no caps on the federal tax credits.

Hawaii State Tax Credits

The Hawaii Energy Tax Credit allows solar customers to claim an income tax credit of 35% of the cost of equipment and installation of a solar hot water system. The credit is capped at $5000 per system.

Systems must be fully installed and functioning in order to qualify for tax credits. A credit that exceeds the taxpayer’s income tax liability may be carried forward to subsequent years until exhausted. We highly recommend you consult with your accountant on all matters tax related.

On average, when factoring in the tax incentives, a solar hot water system pays for itself in two to three years, and a solar electric system pays for itself in five to seven years. The savings on your electric or gas bill, though, happens immediately.

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