What are my financial options to purchase, Lease or PPA a Solar System?
There are several options a homeowner can use to purchase or Lease a Solar System. Before the homeowner makes a decision to purchase or lease, there are some facts that the homeowner should know about both. Knowing these facts, may help the homeowner make a decision between a purchase and a lease.
When a Homeowner Purchases a system . . .
1. They receive a 30% tax credit from the Federal Government on their Federal Income Taxes the following year, no matter what the cost is of the system. This program setup by the Federal Government is called Investment Tax Credit, more commonly referred to as the ITC. This means that the Federal Government could be paying for 30% of your solar system. There are a few conditions that have to be in order, but this 30% Tax Credit works for almost everyone buying a system.
Here are a few Questions and Answers specifically for the ITC
Is there a dollar limit of the solar tax credit?
There is no limit on the dollar value of the Federal ITC. No matter what your system cost, the ITC will cover 30% of your system cost.
What if I don’t owe as much in taxes at the end of the year as 30% of the value of my system?
The federal tax credit is a credit and not a rebate meaning you must have enough tax liability to get full use of the credit.
However, the federal tax credit exceeds your tax liability in the year of installation; the excess amount may be carried forward to the succeeding taxable year.
Some people are concerned that because they have tax withheld from their pay by their employer over the course of the year, and so have no additional tax liability due at the end of the year that they may not be able to use the credit. This is not the case, where you have paid tax in installments during the year then the value of the tax credit would be issued as a refund.
How long does the Federal 30% ITC last?
In relation to solar electricity the following rates of tax credit apply:
- 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.
For further questions on the ITC, please refer to your Tax Consultant.
Does purchasing the system increase the value of my home?
2. Purchasing a solar system will add some value to your home. It won’t be dollar for dollar, but it will add some value to your home.
What happens after my solar system is paid off?
3. After your system is paid for, you don’t need to do anything, As long as your system was setup to the right kW size, you can now enjoy free electricity for many, many years to come. You are basically your own power company at this point.
When a Homeowner uses a PPA or a Lease for their Solar System . . .
Below are some of the differences between a PPA and a Lease.
With a Lease, the monthly payment will be the same every month for the full 20 year agreement, no matter how much or little electricity you actually use.
With a PPA, your monthly payment will change each month. The PPA charges the homeowner a certain price per kilowatt hour, but it’s much less than your Utility Company.
With a Lease, you Lease the system for 20 years. You never have an opportunity to purchase the system during that time.
With a PPA, the homeowner has an opportunity to purchase the system after the first 5 years and every year after that at a discounted price. However, they will not be able to take advantage of the ITC, the 30% tax credit. That can be applied to a system only one time and that goes to the first buyer everytime.
Here are some financial options to purchase, Lease or PPA a Solar System?
Cash Deals are very simple. We require a percentage of the total to be paid at certain times during the full install process as shown below.
Down Payment of 10% or $1,000.00, (whichever is less), is due at the time the Purchase Agreement is signed.
40% Due at Permit Approval
40% Due at Material Delivery / Start of Installation
Balance Due upon Installation Completion / Final signoff per jurisdiction
We have several of the main solar lending institutions setup to work with homeowners. Most of these lenders will require a 650 or a 660 credit score. Because they are constantly improving their offers, I can’t quote any numbers today because there’s a good chance they will be different within a short period of time. However, when you are ready to look at loans, I will be happy to sit down with you and explain everything to you.
County Lending Programs: NO CREDIT SCORE REQUIRED ! !
Nearly every county in California has a lending program for home improvement projects. Solar is one of many items you can finance through your county. Most counties have their own name for this loan, but they are basically the same.
No Credit Score Necessary:
If you have bad credit of even good credit, this is definitely one of the loans to check out. Not all offer what I have listed below, but the majority does.
- 100% Financing, No Money Down
• No Payments For Up To 12+ Months
• Based On Home Equity
• No Minimum FICO Required
• Get Prequalified In Minutes
Most of these programs, you pick the length of the loan. 5, 10, 15 or 20 years.
These county programs actually add your payment to your property taxes. If your property taxes are included with your monthly house payment, then your house payment will go up slightly to cover the loan payment. If you pay your taxes separately twice a year, then those amounts will rise.
The real nice thing about the county adding these payments ti your property taxes, is you can now write them off on you Federal Tax return each year. You can’t do that with any other lenders.
If you want to purchase a solar system, but do not have a credit score of 650 or above, this is a very strong option.
PPA’s & Leases:
As I described above, these two Agreements are very similar, except the couple of differences I mentioned.
We also have companies setup to handle these request as well.