Below are the most critical pieces of information and useful links to ensuring that both you and your contractor are using the correct tax credit information. Rest assured that as information changes, the HSEA will be the first to know and will keep this page up-to-date.
State: 35% or $5,000 cap per system per 5kW DC (STC) Installed
Federal: 30% with no cap
State: 35% up to $2,250
Federal: 30% with no cap
*Also qualifies for Hawaii Energy Rebates which can be found here: Hawaii Energy Rebates
**Hawaii Energy often has rebates of varying value, up to $1,000. These rebates are instant, meaning you can claim your $1,000 rebate immediately.
Helpful Tax Links:
Myths about tax credits
- Tax Credits Cost the State Money
False. Opponents of solar tax credits argue that the tax credit takes money away from the State. For instance, Rich Kahle, current chairman of the Council on Revenues, has stated that the State spent $70 million in tax credits for renewables in 2011. What Mr. Kahle leaves out is the fact that the tax credit generates significant real revenues that stay in the State of Hawaii. Economist Tom Loudat found that for each dollar given as a Hawaii State Tax Credit, two dollars are given back to the State in the form of other tax revenues and income.
Tax credits encourage the purchase of solar installations. Solar installations generate local jobs and the attendant state and federal income tax, general excise and state and federal income tax on behalf of suppliers and installation companies, and funding of the unemployment compensation fund and worker’s compensation fund.
2. Tax Credits don’t really “keep money in the State”
False. Tax credits for renewables enable the installation of renewable energy systems that might not otherwise happen, and renewable energy installations are real, tangible products that generate income that is made and spent here in Hawaii.
Imagine who and what it takes to install a photovoltaic panel. First, the installer, who now has a job, pays state and federal income taxes. He doesn’t burden the state by collecting unemployment. He uses his paycheck to pay for rent, food, a night at the movies, tuition for his kids in local schools. Then both the solar supplier and installation company pay general excise tax and income tax based upon the cost of the supplies and service, and the net profit from the installation. The employer also pays into the unemployment compensation fund and workers’ compensation fund, which may or may not ever be collected. All of this money goes into the state’s economy and the state’s coffers directly, and are a direct result of the tax credit.
3. Yes, but the solar industry would still thrive without tax credits
False. Studies have shown a dramatic correlation between incentives and installation. For instance, based upon a study which researched solar hot water systems in Hawaii and corresponding tax incentives and rebates, the study found a direct rise and fall as incentives changed. For instance, in 1977 Hawaii offered a 10% tax credit, and Hawaii saw 1,101 solar hot water systems installed. In 1978, the Federal government offered a 30% tax incentive, and that year solar hot water installations jumped to 4,016 in Hawaii, a 365% increase from the previous year. More dramatic still, when President Reagan ended the 40% federal tax credit in 1986, SHW installations plummeted 91%, dropping from 6,740 installations in Hawaii in 1985 down to 592 installations in 1986.
Installations are impacted by other factors as well, such as the overall state of the economy and the cost of electricity. However, one thing is certain: with fewer incentives, fewer people will chose to install renewable energy systems.
4. Only Rich People Use Tax Credits
False. Tax records show that it is the middle class and lower income tax payer who take the most advantage of tax credits.
5. Only the Rich can afford to install solar energy
False. Many mechanisms exist where low to moderate income home owners can afford installing a solar energy system. Home owners with good credit can elect to lease a PV system, for instance, in some cases for no money down. A variety of loans are also available at competitive rates.
6. Installation of Renewables Increases Electric Rates for Everyone
False. In 2010, the Public Utilities Commission restructured HECO through a process called “decoupling.” Now, HECO’s profits are not tied to kilowatt hours sold, so a reduction in kWh sold due to an increase in renewables on the grid would not increase rates. The only way this would happen is if those using renewables removed themselves absolutely from the grid. But this complete disconnect is very unusual. Even a “net zero” home is connected to the grid and pays the cost of grid maintenance and energy distribution.
7. Renewable Energy Tax Credits Provide No Public Benefit
False. Tax credits provide benefits to the public in many ways. They bring in jobs and local revenues. They increase our energy independence and bring Hawaii closer to its clean energy goals, and help guarantee a more stable Hawaiian economy that is not held hostage to unpredictable and fluctuating energy prices. They prevent environmental destruction associated with oil and gas product, and renewable development that results from renewable energy tax credits combat global climate change.
8. Clean Energy is Just a Marketing Gimmick
False. In Hawaii, “clean energy,” as it is referred to in the Clean Energy Initiative (2008 Memorandum of Understanding between the State of Hawaii and the U.S. Department of Energy), is energy that is indigenous and sustainable for Hawaii. This type of energy includes wind, wave, solar, solar thermal, and biofuels. What makes these types of energy generation “clean” is their relatively low impact on the environment, and the fact that once installed electricity is produced here at home with the help of the wind, waves, sun, and biomass. Contrast these renewables with imported coal, oil and natural gas all of which are damaging to extract, pollute when burned, and must be imported.
9. Renewables Are Overly Subsidized
False. In 2009, the Environmental Law Institute studied federal energy subsidies between 2002-2008. They found that out of $78 billion dollars in subsidies, 92.8% went to fossil fuels, and the remaining 7.2% went to renewables (including wind, solar, biomass, geothermal, irrigation, hydro, municipal waste, poultry waste, and refined and Indian coal). In other words, the Federal government subsidized fossil fuels at a 12.9 to 1 ratio. And yet renewables are relatively new on the energy market when compared to fossil fuels. And these numbers don’t include the external costs of depending upon fossil fuels, such as the health costs from polluted air and water, clean- up costs to the environment and local economies from extraction and spills, and the cost of going to war to defend strategic oil reserves.