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With the current 2020 Washington State solar incentives, when you install a brand new solar panel installation, you will get back up to 40% of your initial investment in year one.
Washington State Solar Sales Tax Exemption
To encourage growth, Washington state has exempted solar from sales tax. Solar systems under 100 kilowatts (kW) will be exempt from all local and state sales tax. The amount you will save depends on where you live. For example, if you live in Vancouver, WA your savings will be 8.4% because you are no longer paying sales tax to your city or state.
Enacted May 7th, 2019, the Washington State government passed a bill called (E2SSB 5116) to exempt all sales tax on all solar installations. E2SSB 5116 is part of a wider plan to support Washington’s efforts to transition to affordable and reliable clean energy.
Net Energy Metering (NEM)
Solar energy works incredibly well in the rainy areas of Washington. This is due, in part, to a clever legal solar incentive called, Net Energy Metering (NEM).
Under a net metering agreement, you will use any solar electricity that you need at your home, first. Then, when you generate more power than you use, your utility will credit your account — at the same rate they normally charge you!
This makes solar energy an excellent fit here in Washington state because our long, sunny summer days are excellent for generating power. Most homeowners significantly over-produce power during the summer and then automatically use the extra credits they earn during the winter and fall.
Also, contrary to popular belief, solar panels on your home do work when skies are cloudy. They do not produce as much power, of course, but even small bursts of the sun can give your winter generation a significant boost.
Federal Investment Tax Credit (ITC)
The federal government offers homeowners and business owners a tax credit that covers 26% of your total solar installation costs, including parts and labor. This federal solar tax credit can be taken in the same year you install panels on your home and it is easy to claim. You must first subtract your utility cash incentive from the total amount, however.
- Have enough income for the tax credit to be relevant. For those who do not have any federal tax liability, this credit does not apply to you.
- Install solar on the property you own. For those who rent, you are ineligible.
- 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their federal tax liability.
- 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
- 2022 Onwards: Owners of new commercial solar energy systems can deduct just 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.
USDA REAP Grant for Solar
The Rural Energy for America Program, or REAP Grant, allows farmers who earn at least half of their gross annual income from farming operations, and rural small businesses in eligible locations apply for guaranteed loans (up to 85% of the loan) and grant funding.
While we recommending using the REAP grant for solar projects, the loans and grants may also be used to install other renewable energy systems and energy efficiency improvements.
Allowed Renewable Energy Systems
- Biomass – including biodiesel, ethanol, anaerobic digesters, solid fuels, etc.
- Geothermal – for the generation of electricity or for direct use
- Hydropower – less than 30 megawatts
- Wind power generation
- Solar energy generation
- Ocean power generation – tidal, current, or thermal
Allowed Energy Efficiency Upgrades
- Lighting improvements
- Installing high-efficiency HVAC systems
- Insulation improvements
- Transitioning from diesel irrigation motors to electric motors
- Cooling or refrigeration units or improvement of existing units
- Door and window insulation improvements
- Installation of electric, solar, or gravity pumps for sprinkler pivots
- Replacing other qualifying inefficient equipment