Up to 85% of your system costs!

**If you would like the long version read on**

The Federal government will give you 30% of the cost of your system in tax credits or a grant payment regardless of the size (no cap). For business owners you can also fully depreciate 85% of your system in the first year! Depending on your tax bracket that could give you another 30% for a total of 60%!

The Hawaii State government offers you even more! They will give you a tax credit equal to 35% of your system cost.

Tax Credit?

It is important to recognize that both the Federal and State incentives are a tax credit, not a tax deduction. Tax credits are much better because it means that the government incentive is a dollar for dollar elimination of tax liability. For example, if you would otherwise owe $5,000 in state income tax but earn a $5000 solar tax credit, then you owe no State income tax.

What if I have little or no tax liability to use the tax credits?

Both Federal and State governments recognize that in this economy it may be difficult for some to use tax credits. Beginning in the summer of 2009 the Federal Government began offering grants for solar. It is as simple as filling out an online application and they will send you a check for the full incentive within 60 days of installing the system regardless of your tax liabilities.

The State also passed a Senate Bill last summer (SB464) that allows individuals to elect to disconnect the incentive from their tax liability and take a reduced incentive in the form of a 24.5% rebate check.

This means that low tax liability is no issue.

Can I depreciate the cost of the system?

Federal section 179 allows 5 year accelerated depreciation of 85% of your system costs. However, in December of 2010 Bonus depreciation was extended that allows for full depreciation of 85% of your system costs in the first year! State allows depreciating 100% over 5 years. The combined depreciation tax benefits amount to upwards of 35% of your system cost.

Click on the links below to visit the DSIRE web site for further references regarding solar incentives:

Note: You may have noticed that the Hawaii State incentive is 35% yet we have listed in our opening calculation as only 25% (approximate after tax). This is because any income tax you pay the State is a tax deduction on your Federal tax return, and the opposite is true. Reducing the amount you pay the State means less deduction on Fed side. Essentially this mean you pay tax on the State solar tax credit. Therefore the real State incentive is the 35% reduced by your Fed tax bracket.

Not sure what tax bracket you are in?

Refer to these clickable links:             

Fed Tax Brackets

Hawaii Tax Brackets