Understanding the Utah Solar Tax Credit
Residents of Utah installing a solar power system can benefit from both federal and state tax credits for renewable energy. To apply for the Renewable Energy System Tax Credit (RESTC) program in Utah you can take the following steps:
Steps for Utilizing the Utah Solar Tax Credit:
- Install a solar energy system
- Create an account with the Governor’s Office of Energy Development (OED)
- Complete a solar PV application
- Receive and save your TC-40E
- Claim the Renewable Residential Energy System Credit
- If audited, provide your TC-40E
Utah Solar Tax Credit: Utah Renewable Energy Systems Tax Credit (RESTC) Program
With available tax credits from both state and federal governments, now is the best time to invest in solar energy for your home. Over the next few years, both solar incentives will be decreasing in value until they expire. Energy costs are expected to increase over that same time period. In addition to these factors, Utah has voluntarily mandated that a percentage of energy produced in the state should come from renewable energy sources. The RESTC program is one method Utah is using to meet this mandate.
How much is the tax credit worth?
Until 2021, the RESTC program offers a tax credit equal to 25% of eligible system costs or $1,600, whichever is less. The tax credit can be claimed again for additional systems or parts in the following years. However, the tax credit will decrease in value by $400 each year until it expires. By 2024, the tax credit will only be worth $400.
When does the tax credit expire?
Utah’s RESTC program is set to expire in 2025. From 2018 to 2021 the maximum tax credit is 25% of system costs or $1,600, whichever is lower. While the 25% of eligible solar system costs will remain the same over the life of the program, only the lesser amount can be claimed and the value decreases by $400 each year from 2022 to 2024.
How does the tax credit work?
Utah’s tax credit can be claimed when filing your state income taxes. It is assessed as a reduction of your tax liability and is non-refundable, so any excess will not be paid out as cash. If the amount of your tax credit is more than your tax owed, the remaining amount can be rolled over and used in the following years (up to four years after filing.)
When filing your state taxes, you can claim the Renewable Residential Energy Systems Credit: Code 21. Be sure NOT to select Qualifying Solar Project Credit. While you do not need to file your TC-40E with your state or federal taxes, you will be required to present it if you are audited.
Additional Information on Utah’s Tax Credit for Renewable Energy
Utah’s RESTC program is available in addition to the federal Investment Tax Credit (ITC). However, the ITC will also decrease in value over the next few years. Some local utility companies in Utah offered incentives for renewable energy in order to meet future state requirements; however, some of these incentives have expired. A major energy provider, Rocky Mountain Power, offered an incentive for residential solar net metering customers, but this program expired in 2017. It is not too late to install a solar system and claim the Utah solar tax credit. Even if you have already used it once, additional systems or parts may be eligible to claim in later years, but cannot exceed $2,000 per residential unit. Finally, the tax credit for an eligible solar system can be transferred to a new owner if the residence is sold before the tax credit is claimed. Please verify that any purchase you are planning to make is eligible for the solar tax credit. A good way to do this is to enlist the services of a stellar solar installation company like ION Solar.
Steps for utilizing the Utah solar tax credit
1. Install a solar energy system
There are many benefits to installing a solar energy system in your home. Besides a lower power bill, the excess energy produced could be sent to the local grid via an interconnection agreement with your local utility company. When considering taking advantage of these great tax programs, it may be worth your time to contact a professional solar system installer such as ION Solar for detailed information. In some cases, a full-service installer will handle most of the necessary steps for you. These steps can include handling agreements with your utility company, arranging mandatory inspections, and applying for your TC-40E.
Utah is a state that has a voluntary Renewable Portfolio Standard (RPS) which requires utilities to source a percentage of their power generation from renewable sources like solar. The mandate requires that Utah produce 20% of energy from renewable sources by 2025. Rocky Mountain Power is one of the leading electric service providers in Utah and nearby states. One method utilities can use to produce this power is by interconnecting with residential solar systems. There are several options to interconnect such as net metering and feed-in tariffs (FITs). As of November 15, 2017, Rocky Mountain Power stopped accepting net metering agreements and has instead instituted the current Transition Program. In this program, customer-generated energy in excess of usage is calculated over 15 minute periods and the cumulative net difference is applied to the monthly billing period. Contact your electricity provider to see what programs and incentives they offer for customer generated renewable energy.
2. Create an Account with the Governor’s Office of Energy Development (GOED)
After you or your professional solar energy contractor has installed your solar panels and you’re ready to file for your state tax credit, you must create an account with the Governor’s Office of Energy Development (GOED). This process is easy if you have hired a reputable solar system installer. In addition to providing helpful ongoing maintenance, they may handle all of these steps for you. In this case, you can contact your installer for your TC-40E. Otherwise, once you set up an account you will need to complete a solar PV application in order to receive a TC-40E.
3. Complete a solar PV application
Completing a solar PV application requires several important documents to be submitted. They can be uploaded online using the account you created at the Office of Energy Development’s website. One of the requirements is an interconnection and net metering agreement signed by both you and your utility power suppliers like Rocky Mountain Power or a municipal power supplier. In Utah, if you live in the service area for either of these two providers you must interconnect to the local grid. You may be required to invest in additional interconnection equipment in order to protect line workers and the local grid. Some utilities may use a closure letter which can be used instead of a net metering and interconnection agreement.
The solar PV application requires these documents to be submitted:
- Interconnection and Net Metering agreement or closure letter
- Invoice for the solar PV system installation
- Schematic of the solar PV system
- Photos of the installed PV system
As of August 15, 2018, solar PV applications require a $15 check to be made out to the Governor’s Office of Energy Development, according to Utah Code 63M-4-401. Include both the taxpayer name and current address where panels were installed. You can make the checks out to:
Governor’s Office of Energy Development
P.O. Box 144845
Salt Lake City, UT 84114-4845
Prior to sending your check, please verify this mailing address, and make sure the fee amount has not changed on the Office of Energy Development’s website.
4. Receive and save your TC-40E
Once you complete your application, you will receive an email from the Office of Energy Development indicating the expected response time, which usually ranges from several days up to 6 weeks. Make sure to apply for this form well before tax season, as busier times may cause longer delays. Once the application is approved you, or your solar installer will receive your completed copy of the TC-40E with certification stamp. Even though you are not required to send this form when filing your taxes, you do need to have it available in case of an audit. File it with your personal records or tax accountant and if audited, present to the Utah State Tax Commission.
5. Claim your Renewable Residential Energy System Credit
When it comes time to file your state income tax, you can claim certain costs from your solar installation. On Utah’s TC-40A Part 4, use code 21 to claim the Renewable Residential Energy System Credit. When filing your taxes, there is a credit that looks similar that you should not use. Do not select the Qualifying Solar Project Credit. You are not required to have or to submit your TC-40E from the OED when you file your taxes, but you do need to have it if you are audited.
6. If audited, provide your TC-40E
In the case that your taxes are audited and you claimed the Renewable Residential Energy System Credit, then you will be required to present a TC-40E. If you hired a solar energy contractor they may have a copy of your TC-40E. You can send this to the Utah State Tax Commission or give a copy to your tax accountant. If you have not applied for a TC-40E you can go to the Governor’s Office of Energy Development to start an application. Be aware that it may take some time for the application to process, especially during the busy tax season.
Summary of the Residential Energy System Tax Credit (RESTC)
Investing in renewable solar energy for your home is a choice you must consider carefully, but the benefits are clear. Solar power will reduce your energy needs and can lower your power bill. Depending on the interconnection agreement you obtain from your local electrical utility, you can even earn credit for exporting energy to the grid. Current federal and Utah solar tax credits offer an incentive to invest now. Both of these tax credits will decrease over the next few years and end in 2025. From 2018 to 2021, the maximum credit available for residential solar PV is 25% of eligible costs or $1,600, whichever is lower. This amount decreases by $400 each year after until it expires.
You can apply for the Utah solar tax credit yourself or ask your solar installer to gather and complete the necessary steps. You must create an account with the Office of Energy Development and submit the necessary forms. These include an interconnection and net metering agreement or closure letter from the utility company, invoices from your solar PV installation, schematics of the PV system, and photos of the completed solar system. Additionally, there is now a $15 fee due before the OED will issue your TC-40E.
Claim your Renewable Residential Energy System Credit when filing your Utah income tax. While you do not need to have your TC-40E to claim the credit, you do need to have it if audited. If applicable, the tax credit acts as a reduction to your income tax liability. It will not be refunded to you as cash, but any excess can be applied to future income tax years (up to four after claiming). If interested, you can claim the credit again for eligible additional systems or parts in later years. If you have not obtained your TC-40E, you can request the form after filing your taxes. Be sure to contact a tax accountant if you have specific questions regarding filing for this credit.
If you are interested in solar energy, now is the best time to research your options. There are also many financial options available for solar, potentially with no out of pocket costs. Reach out to a certified solar installation contractor such as ION Solar for a free quote and information on whether solar is a good option for your home.
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