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NC Solar Incentives to Take Advantage of in 2023
- Alyssa Hardbower
- January 19, 2023
- 10 Minute Read
Topics in This Article
North Carolina Solar Discounts
Tis’ the season for change! It’s a new year and a great time to take control of your power. Whether you’re tired of paying high electric bills and watching utility rates increase, or you’re ready to switch to clean power, now’s the perfect time to look into your energy independence.
There are a number of powerful financial incentives available to North Carolina residential, commercial, and nonprofit solar projects in 2023. Here’s a rundown of national and local North Carolina solar incentives you may be eligible to tap into this year.
Upfront Tax Disclaimer
We are not tax professionals (surprise!) and this post does not constitute professional tax advice or guidance. If you end up going on your solar journey with us, we can connect you with Lucas Tax and Energy, a CPA specializing in energy related tax issues, that we keep on retainer as a service to our customers.
Residential Solar Incentives
New and existing NC homes that install solar in 2023 may be eligible to take advantage of the 30% Federal Solar Investment Tax Credit (ITC) for solar.
When this discount is applied to our average sized home solar system (around 7.7kW), you can expect to see roughly $10,500 off of our average turn-key price of $35,000. Let’s dive into the specifics in this section!
30% Federal Solar Investment Tax Credit for Homes
The 30% Federal Solar ITC was established in 2005 by the Energy Policy Act. At first it was intended to last one year, but after several sunny extensions we’re excited to report this incentive will be here to stay at 30% until 2032. You can learn more about the history of the tax credit and the most recent extension from the signing of the Inflation Reduction Act here.
How Does the Solar Tax Credit Work?
Since Jan. 1 2022, homeowners who pay federal taxes and have a solar system placed into service by the end of the year are eligible for a tax credit worth 30% of the cost of their system.
This means, for an average $35,000 solar system a homeowner can claim a $10,500 credit when filing their 2023 taxes. In this example, if they owe $11,000 in taxes, they will only need to pay $500 in taxes after claiming the solar ITC ($11,000 – $10,500 = $500).
The great part is, there’s no cap on the system value that can be claimed via the Federal Solar Tax Credit. However, there are limits on what is eligible to include in the system cost. System components that can be counted toward the credit include solar panels, racking/mounting equipment, inverters, balance of system (wire, conduit, junction boxes, etc), installation labor (including design, inspection, and permitting fees), and sales & use taxes.
*Note: energy efficiency upgrades are not included on the above list! We have seen several solar companies try to include items like insulation, LED bulbs, smart thermostats, etc. as a solar system upgrade. These items are not eligible for the solar ITC.
Duke Energy Solar Rebate for Homes
The Duke Energy Solar Rebate was a (highly competitive) one-time rebate available to homes, businesses, and nonprofits serviced by Duke Energy in North Carolina. The Duke Energy Solar Rebate began in 2018 as a result of House Bill 589 and concluded in January 2023.
Currently, there are no official plans for the Duke Solar Rebate to return in 2023. However, other solar incentives in North Carolina, such as the Federal Tax Credit, still make it a great time to start your solar journey.
Other NC Residential Solar Incentives
With many new players joining the hot NC solar market, we’d like to throw out a word of caution to be skeptical if you see an “NC state tax credit” on your solar proposal. Beyond the incentives we’ve outlined, no other significant incentives are available at the Federal or state level in North Carolina. As always, when working with a solar installer, make sure pricing is transparent and terms are clearly defined. Here are a few other things to look for on your solar proposal.
Calculate Your Solar Savings
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Solar Incentives for Businesses in NC
There are even more solar incentives available for North Carolina businesses to take advantage of in 2023. When combined, the 30% Federal Solar Investment Tax Credit (ITC), Accelerated Bonus Depreciation, and the US Department of Agriculture (USDA) Rural Energy for America Program (REAP) Grant make it possible for businesses to offset 70-90% of the cost of going solar.
While situations where all 4 of these incentives stack together to reach 90% offset are rare, most of our commercial solar customers will see savings of between 40-70% on their solar system with some combination of those incentives.
30% Federal Solar Investment Tax Credit for Businesses
Since there is no cap on the amount you can claim via the Federal Solar ITC, businesses can also claim the 30% solar tax credit.
Businesses that pay federal taxes and have a solar system placed into service by the end of the year are eligible for a tax credit worth 30% of the cost of their system.
This means, for an average $205,000 solar system a business can claim a $61,500 credit when filing their 2023 taxes. This would bring the net cost of the solar system down to $143,500. Similar to a home solar system, there is no cap on a commercial solar system value that can be claimed using the Federal Solar Tax Credit. Spoiler alert: The savings get even more exciting when you factor in additional Bonus Deprecation savings on top of that.
More information about the Federal Tax Credit can be found on DSIRE.
Accelerated Bonus Depreciation
Commercial solar systems are also eligible for accelerated first year bonus depreciation. Most assets are depreciated over a long period of time, but this incentive gives business owners the benefit of additional tax savings.
The value of depreciation depends on the business’ effective tax rate. For this example, let’s use a $100,000 system. In this case, if the business gets taxed at 20%, bonus depreciation impact is $20,000 less taxes paid. If a business is taxed at 35%, the impact would be $35,000 less taxes paid. So depending on the business’ effective tax rate, this incentive could be even more valuable than the Federal Tax Credit for Solar, taking another 20-35% off the cost of the system in the first year.
More information about bonus depreciation can be found at DSIRE: MACRS Depreciation.
USDA REAP Grant
The USDA Rural Energy for America Program (REAP) Grant provides grants and loans to farmers and businesses for renewable energy projects, energy efficiency upgrades, and energy audits. Eligible farms and businesses can apply for a grant worth 50% of the project cost (up to $1 million).
Grants are awarded quarterly. Preparing your application takes several weeks, so get started early to make sure there is time to meet the deadline.
To qualify for the USDA REAP Grant, you must be an Agricultural Producer or Rural Small Business. It takes 5 minutes for us to determine if you’re eligible. Reach out today to see if you qualify or check to see if you’re eligible at usda.gov.
Agricultural Producer
Individual or entity directly engaged in agricultural production whereby 50% or greater of its gross income is derived from agricultural production.
Rural Small Business
An entity or utility that meets the Small Business Administration’s (SBA) Small Business Size Standards by the North American Industry Classification System (NAICS) found in 13 Code of Federal Regulations (CFR) Part 121.
More information about the USDA REAP Grant can be found at DSIRE.
Duke Energy Solar Rebate for Businesses
Unfortunately, similar to the Duke Energy Rebate for residential customers, Duke’s Rebate program has expired for commercial customers as well. The program ran from 2018 through 2022 and currently has no plans to return in 2023.
Nonprofit Solar Incentives
Exciting solar news! Even though the Duke Solar Rebate has expired, there is still an opportunity for North Carolina nonprofits to claim a solar incentive with the new 30% Direct Pay option. Learn more below!
30% Federal Direct Pay Reimbursement
Historically, nonprofits & government organizations were not eligible for the 30% Solar Investment Tax Credit (ITC) since nonprofits do not have tax liability. However, the recent signing of the Inflation Reduction Act (IRA) expands the 30% incentive to include nonprofits and government organizations through a Direct Pay Reimbursement. This is huge news in the solar world, and opens up many more opportunities to expand solar across nonprofit and government-owned roofs!
Other Solar Incentives for Nonprofits
Unfortunately, since the Duke Rebate program expired in 2022, there is not another major solar incentive option available to nonprofits at the state level in NC. We will update this guide as soon as we hear of any other solar funding opportunities.
Make a resolution to ditch your energy bill in 2023!
There are many reasons to go green, and several incentives that will save you even more. Going solar is a big decision, with a big reward. Let us know how we can help you tap into solar incentives and take control of your power this year.
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