SOUTH CAROLINA RESIDENTIAL SOLAR INCENTIVES

Federal Residential Renewable Energy Tax Credit

A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner. 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. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below:

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022
  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
  • The home served by the system does not have to be the taxpayer’s principal residence.

More Information
Download the IRS form 5695
IRS Form 5695 Instructions
Download our Residential Solar Tax Credit Explainer Infographic

South Carolina Solar Incentives

South Carolina Residential Renewable Energy Tax Credit

In South Carolina, taxpayers may claim a credit of 25% of the costs of purchasing and installing a solar energy system or small hydropower system for heating water, space heating, air cooling, energy-efficient daylighting, heat reclamation, energy-efficient demand response, or the generation of electricity in a building owned by the taxpayer. Effective July 1, 2009, SB 1141 expanded the scope of this credit to include small hydropower systems. Only hydropower systems installed after July 1, 2009 are eligible for the tax credit. HB 3874 of 2016 expanded the scope again to include geothermal energy projects installed between January 1, 2016 and January 1, 2019.

The maximum credit a taxpayer may take in any one tax year is $3,500 for each facility or 50% of the taxpayer’s tax liability for that taxable year, whichever is less. Unused credit, or credit that exceeds the annual cap, may be carried forward for 10 years.

More Information
South Carolina Department of Revenue Form TC-38

FEDERAL SOLAR INCENTIVES FOR COMMERCIAL INSTALLATION

Business Energy Investment Tax Credit (ITC)

Note: The Consolidated Appropriations Act, signed in December 2015, included several amendments to this credit which applied only to solar technologies and PTC-eligible technologies. However, the Bipartisan Budget Act of 2018 reinstated this tax credit for the remaining technologies that have historically been eligible for the credit.  

The federal Business Energy Investment Tax Credit (ITC) has been amended a number of times, most recently in February 2018. The table below shows the value of the investment tax credit for each technology by year. The expiration dates are based on when construction begins.

Technology 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Future Years
PV, Solar Water Heating, Solar Space Heating/Cooling, Solar Process Heat 30% 30% 30% 30% 26% 22% 10% 10%
Hybrid Solar Lighting, Fuel Cells, Small Wind 30% 30% 30% 30% 26% 22% 22% N/A
Geothermal Heat Pumps, Microtubines, Combine Heat and Power Systems 10% 10% 10% 10% 10% 10% N/A N/A
Geothermal Electric 10% 10% 10% 10% 10% 10% 10% 10%
Large Wind 30% 24% 18% 12% N/A N/A N/A N/A

 

Eligible Solar Technologies. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) 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. Passive solar systems and solar pool-heating systems are not eligible.

In general, the original use of the equipment must begin with the taxpayer, or the system must be constructed by the taxpayer. The equipment must also meet any performance and quality standards in effect at the time the equipment is acquired. The energy property must be operational in the year in which the credit is first taken.

Significantly, the American Recovery and Reinvestment Act of 2009 repealed a previous restriction on the use of the credit for eligible projects also supported by “subsidized energy financing.” For projects placed in service after December 31, 2008, this limitation no longer applies. Businesses that receive other incentives are advised to consult with a tax professional regarding how to calculate this federal tax credit.

More Information
Download the IRS form 3468
IRS Form 3468 Instructions

Modified Accelerated Cost-Recovery System (MACRS)

Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. A number of renewable energy technologies are classified as five-year property (26 USC § 168(e)(3)(B)(vi)) under the MACRS, which refers to 26 USC § 48(a)(3)(A), often known as the energy investment tax credit or ITC to define eligible property. Such property currently includes*:

  • a variety of solar-electric and solar-thermal technologies
  • fuel cells and microturbines
  • geothermal electric
  • direct-use geothermal and geothermal heat pumps
  • small wind (100 kW or less)
  • combined heat and power (CHP)
  • the provision which defines ITC technologies as eligible also adds the general term “wind” as an eligible technology, extending the five-year schedule to large wind facilities as well.

Note: The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. 

More Information
View Title 26 of Internal Revenue Code

Renewable Energy for America (REAP) Program – 25% Cash Grant

The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses in America to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies that reduce energy consumption, and participate in energy audits and renewable energy development assistance.

Renewable energy projects for the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program include wind, solar, biomass and geothermal, and hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. These grants are limited to 25% of a proposed project’s cost, and a loan guarantee may not exceed $25 million. The combined amount of a grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost. In general, a minimum of 20% of the funds available for these incentives will be dedicated to grants of $20,000 or less. For more information on grant, loan guarantees, loan financing, and opportunities for combinations thereof, visit the USDA website.

Application due dates are published annually in the Notice of Funding Availability.

More Information
USDA REAP Eligibility Map

Renewable Energy for America Loan Guarantee Program

The Rural Energy for America Program (REAP) provides financial assistance to agricultural producers and rural small businesses in rural America to purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies that reduce energy consumption, and participate in energy audits and renewable energy development assistance.

Renewable energy projects for the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program include wind, solar, biomass and geothermal, and hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. These grants are limited to 25% of a proposed project’s cost, and a loan guarantee may not exceed $25 million. The combined amount of a grant and loan guarantee must be at least $5,000 (with the grant portion at least $1,500) and may not exceed 75% of the project’s cost. In general, a minimum of 20% of the funds available for these incentives will be dedicated to grants of $20,000 or less. For more information on grant, loan guarantees, loan financing, and opportunities for combinations thereof, visit the USDA website.

Application due dates are published annually in the Notice of Funding Availability.

More Information
USDA REAP Eligibility Map