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Solar Tax Incentives

In an effort to promote safe, non-polluting renewable energy, the federal government and State of New Jersey are offering incentives that lower the cost of installing solar photovoltaic (PV) systems in both businesses and homes.

Below are the current incentives being offered and the type of property that qualifies to receive it. Please note that some of these solar incentives are set to expire or be modified at the end of 2011.

Federal Solar Tax Incentives

  • Business Energy Investment Tax Credit (ITC)

    Applicable Sectors: Commercial, Industrial, Utility, Agricultural

    The American Recovery and Reinvestment Act of 2009 allows taxpayers to take the ITC or to receive a cash grant in lieu of the ITC for new solar power installations. The credit is equal to 30% of expenditures. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible. The grant is only available to systems where construction begins prior to December 31, 2011.

  • Modified Accelerated Cost-Recovery System (MACRS) + Bonus Depreciation (2008-2012)

    Applicable Sectors: Commercial, Industrial, Agricultural

    Under MACRS, businesses may recover investments in certain property through depreciation deductions. The 5-year schedule for most types of solar has been in place since 1986. The federal Economic Stimulus Act of 2008 included a 50% first-year bonus depreciation provision for eligible renewable-energy systems acquired and placed in service in 2008. In December 2010, the provision for bonus depreciation was amended and extended yet again by The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Under these amendments, eligible property placed in service after September 8, 2010 and before January 1, 2012 qualifies for 100% first-year bonus depreciation. For 2012, bonus depreciation is still available, but the allowable deduction reverts from 100% to 50% of the eligible basis.

New Jersey Solar Incentives

  • Personal Tax Credit

    Applicable Sectors: Residential

    A taxpayer may claim a credit of 30% of qualified expenditures for a solar energy system that serves a dwelling unit located in the United States and used as a residence by the taxpayer. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home (which does not have to be the taxpayer's principal residence). If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit may be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then.

  • Solar Energy Sales Tax Exemption

    Applicable Sectors: Commercial, Industrial, Residential, General Public/Consumer

    New Jersey offers a full exemption from the state's sales tax (currently 7%) for all solar energy equipment. This exemption is available to all taxpayers. All major types solar energy equipment, including equipment for passive solar design, are considered eligible for the exemption.

  • Property Tax Incentive

    Applicable Sectors: Commercial, Industrial, Residential

    In October 2008, New Jersey enacted legislation exempting renewable energy systems used to meet on-site electricity, heating, cooling, or general energy needs from local property taxes. In order to claim the exemption, property owners must apply for a certificate from their local assessor which will reduce the assessed value of their property to what it would be without the renewable energy system.

  • Property Tax Incentive

    Applicable Sectors: Agricultural

    In January 2010, New Jersey enacted legislation (S.B. 1538) that states that the addition of a solar energy generating system to land that was assessed and taxed as farmland during the prior tax year does not automatically preclude the land from continuing to qualify for this treatment. Instead, the law sets a series of conditions that must be met in order for the land to continue to be assessed as farmland. You can view these conditions by visiting the DSIRE website.

  • Renewable Energy Manufacturing Incentives (for End-Use PV Installations)

    Applicable Sectors: Commercial, Industrial, Residential, Nonprofit, Schools, Local Governments, State Government, Tribal Government, Federal Government, Multi-Family Residential, Agricultural, Institutional

    In September 2009, New Jersey opened the Renewable Energy Manufacturing Incentive (REMI) program, which provides rebates for homeowners and businesses that install renewable energy system components manufactured in New Jersey. Total incentives range from $0.05 - $0.55 per watt DC, depending on sector, system size, and the type(s) of eligible equipment incorporated into a system. You can view a summary of how incentives are calculated for different systems by visiting the DSIRE website.

  • NJBPU - Solar Renewable Energy Certificates (SRECs)

    Applicable Sectors: Commercial, Industrial, Residential, Nonprofit, Schools, Local Governments, State Government, Tribal Government, Federal Government, Agricultural, Institutional

    SRECs represent the renewable attributes of solar generation, bundled in minimum denominations of one megawatt-hour (or 1,000 kilowatt-hours) of production. New Jersey’s SREC program provides a means for SRECs to be created and verified, and allows electric suppliers to buy and retire these certificates in order to meet their solar renewable portfolio standard (RPS) requirements. Learn more about New Jersey's SREC program.