North Carolina Tax Incentives for Renewable Energy

North Carolina residents interested in installing a renewable energy system at home can take advantage of some tax incentives offered by the state. There is a credit against your personal North Carolina state income tax, a property tax exemption, and a sales tax holiday that can help to offset part of the cost.

Renewable energy tax credit

You can claim a tax credit for 35% of the cost of renewable energy property that you construct, purchase, or lease and place in service at your home in North Carolina. The maximum credit ranges from $1,400 to $10,500 as follows: $1,400 for a solar water heating or solar pool heating system; $3,500 for a solar active or passive space heating system or a combined solar space heating and hot water system; and $10,500 for a solar electric or solar thermal system, or a wind, hydroelectric, or biomass system.

The costs of the renewable energy system eligible for the North Carolina tax credit include the cost of the equipment, and the design, construction and installation costs of the system, less any discounts, rebates, allowances, and other incentives including public assistance or grants. Repairs to an existing system do not qualify for a tax credit, but if you purchase new equipment to increase the capacity of your renewable energy system, the cost would be eligible for a credit.

The renewable energy system must be installed by a licensed electrical contractor or if you install it yourself you must have permission from an electrical inspector. The system must meet the requirements of the National Electrical Code and all applicable North Carolina state and local codes and inspections. The North Carolina Solar Center has a Directory of Renewable Energy Professionals on its website at www.ncsc.ncsu.edu under Homes.

The renewable energy system must be placed in service and be fully functional in order to qualify for the tax credit. If you have paid for a system but have not yet placed it in service, you cannot claim the credit until your system is up and running.

How to claim the credit

The tax credit for a renewable energy system is claimed on your North Carolina state individual income tax return. The amount of the credit is calculated on Form NC-478G and is then carried forward to Form NC-478. You can download these forms from the North Carolina Department of Revenue website at www.dor.state.nc.us.

The total amount of the renewable energy tax credit cannot exceed 50% of your tax liability for the year, less the sum of all your other credits. But any unused credit can be carried forward for five years.

Property tax exemption

According to the Database of State Incentives for Renewables and Efficiency, the additional value that a solar system adds to your property, in excess of the value of a conventional system, is exempt from property tax. This exemption applies to solar water heating, solar space heating, and solar space cooling systems. For these purposes, the solar system includes all the controls, tanks, pumps, heat exchangers, and other equipment directly and exclusively used for converting solar energy for heating and cooling.

Sales tax holiday

If you are planning to purchase an energy efficient appliance in North Carolina, you can take advantage of a sales tax exemption. The Database of State Incentives for Renewables and Efficiency reports that North Carolina enacted legislation in July 2008 to establish a sales tax holiday for Energy Star appliances sold during the week starting on the first Friday of November through the following Sunday.

The sales tax exemption is for appliances that meet the energy-efficiency guidelines established by the U.S. Environmental Protection Agency and the U.S. Department of Energy, and includes clothes washers, freezers and refrigerators, central air conditioning units and room air conditioners, air-source and geothermal heat pumps, ceiling fans, dehumidifiers, and programmable thermostats.

Net Metering

Once you have installed a renewable energy system at your home and are connected to the grid, you can get a credit on your electric bill for the net excess electricity you generate. The North Carolina Utilities Commission requires the three investor-owned utility companies in the state to make net metering available to customers who have residential solar photovoltaic, wind, hydroelectric, or biomass electricity-generating systems with a capacity of up to 20 kW.

The electricity you generate in excess of your consumption is credited to your next bill at the utility company's retail rate. Annually, at the beginning of the summer season, the excess balance is granted to the utility.

Sources:
Database of State Incentives for Renewables and Efficiency (DSIRE) -North Carolina Homeowner Incentives for Renewables and Efficiency: www.dsireusa.org
North Carolina Department of Revenue - Tax Forms and Instructions: www.dor.state.nc.us
North Carolina State University - North Carolina Solar Center: www.ncsc.ncsu.edu