Federal Incentive: Income Tax Credit for solar energy

In August, the Inflation Reduction Act (IRA) of 2022 passed, extending the Federal Investment Tax Credit (ITC) until the end of 2032. The ITC is now available for 30% of the total cost of purchase and installation (including sales tax) of a solar photovoltaic system, providing the owner has sufficient tax liability. This tax credit is a dollar-for-dollar reduction in taxes owed, usable by individuals or businesses. Consult your tax adviser to learn how this tax policy affects you.

State Incentives:

As of July 1, 2019, the purchase and installation of a solar system in Washington (size 1 KW to 100 KW) are exempt from state sales tax. Customers are not required to pay sales tax at the time of installation. The state legislature passed this incentive to support the continued growth of clean, renewable electricity in our state. Installation must be completed by Dec. 31, 2029, to qualify for the sales and use tax exemption.

For systems larger than 100 KW, a partial or complete sales tax rebate is available within parameters governed by CETA, the Clean Energy Transformation Act E2SSB 5116 (sections 18 and 19, Chapter 288, Laws of 2019) for further details). Learn more on the State Dept. of Revenue website.

RESIP: Expired

Renewable Energy System Incentive Program (RESIP) – no longer accepting applicants – RESIP was enacted by the Washington State Legislature in July 2017 as the Solar Jobs Bill, SB 5939. Although RESIP was designed to help consumers go solar over four years (2018 through 2021), it was so popular that state funds were obligated before the end of the second year. It is no longer accepting applications.

Contact WSU Energy Program if you have questions. We recommend you check out our page on grant opportunities. You can find Utility and Federal level programs to fund your solar projects!

Tax Forms

Individuals use tax form 5695 (see line #1 on the form for “qualified solar electric property costs”). The electricity generated must be used to power a home that you live in at least part of the year.

The business that installs, develops, and/or finances a solar project claims the credit using tax form 3468. Businesses also benefit from a modified accelerated depreciation schedule (MACRS) over five years, plus a double-counting bonus of half of the federal tax credit (i.e., half of 26%) of the system cost. If a commercial project is started in one year and finished in another, the owner or developer may benefit from the “commence construction” clause. There is no upper limit on the value of this tax credit. It can be used more than once if you install solar in a subsequent year, provided you meet all other qualifications.

Utility Incentive: Net Metering

Your electric bill is immediately reduced because you pull less electricity from the grid when you go solar. Additionally, whenever your system generates more electricity than you are using at that moment, your excess power automatically feeds back into the grid – in essence spinning your meter backward.

The kilowatt-hour (kWh) is credited to your bill for later use, for instance, in winter, further contributing to your Electric Bill Savings. The credits are reported to you when you end the month with excess kWh on your bill. Credits roll over month to month but not year to year. Credits zero out on March 31 annually, then a new net metering year begins. This date aligns well with Washington’s solar generation so that you can make the most of solar electricity generated in April.

Energize your savings through the winter

Net Metering allows customers to generate electricity to offset up to 100% of their use over one year. Still, Net Metering does not offset the utility’s monthly minimum or base rate. Learn more by visiting your utility’s website and searching for “net metering” or “customer generation.” Some large utilities are PSESeattle City LightSnopudPacific PowerTacoma PowerAvista.

In Washington, Net Metering is a one-for-one credit for each kilowatt-hour when total solar system capacity is between 1 kW to 100 kW. Utilities are not required to offer Net Metering to additional customers once their minimum obligation is met. Customers should first check with their utility to see if Net Metering is available. Net Metering is an agreement between a utility and its customer, so be sure to get a copy of that agreement.

NWES and Net Metering

NWES facilitates approval of your solar system by your utility’s net metering program by providing the detailed interconnection application and electrical one-line drawing to meet your utility’s standards and requirements. And, of course, we install to meet electrical code and building code standards.

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