Illinois Solar Incentive Guide

Commit Now to Huge Solar Savings!

Calling all Illinois residents and business owners! If you’re considering adding alternative energy to your home or business, we’ve got great news for you: there are a number of rebates and incentives available to help make it more affordable, so now is a great time to invest!

A solar energy system requires a financial commitment upfront, but over time pays for itself. Now thanks to both state and federal incentives, you can fasttrack your investment and start seeing the savings much quicker!

We understand that language around renewable energy and taxes can be jargon-filled and confusing. We’ve broken down all you need to know about the Illinois tax credits, rebates and incentives for renewable energy in 2019 and beyond! 

Illinois Shines Adjustable Block Program (ABP)

Illinois is committed to producing 25 percent of its electricity from renewable resources by 2025. To help achieve this goal, the state created a program called the Illinois Shines Adjustable Block Program (ABP), which incentivizes homeowners and businesses to purchase and install solar energy by offering unheard-of tax credits.

The Process

To participate, you must be an Illinois business or resident, and you must have a solar PV system installed on your rooftop or property by a certified solar contractor (like Arrow Energy). 

As a certified solar contractor, we apply to the Illinois Power Agency Program on behalf of your system, which includes processing and submitting an application and applying your savings. Then we network all of your equipment to auto-report to the program so you never have to worry about a thing!

As part of our initial site visit and consultation, we provide our customers with honest and accurate funding projections, never inflating numbers or over-promising generation. That means when your PV system is in place, there won’t be any surprises! More details around our solar installation process can be found here.

Solar Energy Savings, Explained

We’ve eliminated the confusing jargon and legalese to get down to brass tax.

  1. For each megawatt hour of electricity your solar system produces, you get one Solar Renewable Energy Credit (SREC).
  2. You can sell your SREC credits in the market, creating an income stream for the life of your system. SRECs have value because utility companies need to offset their energy sources with a certain amount of renewable energy. 
  3. Utility companies purchase these SREC’s  from renewable generation owners (that’s you!). The program provides payments in exchange for 15 years of SRECs. 
  4. These payments help offset the cost of your new PV system, and participants receive the first payment just two fiscal quarters after interconnection (6-9 months). 

Selling your SRECs will not affect you PV system’s production and participating in the program means you play an important role in helping Illinois meet its renewable energy goals!

The Federal Investment Tax Credit (ITC)

Not only does the state of Illinois want to help you or your business go solar – the federal government does, too! Right now you can get a 30 percent return on your solar energy system investment thanks to the federal Investment Tax Credit (ITC).

Time is running out to take advantage of the 2019 ITC because this incentive won’t be available at this percentage much longer – 30 percent in 2019 drops to 26 percent in 2020, 22 percent in 2021, and just 10 percent after that (on commercial only).

There’s still time to get your 2019 tax credit! Contact us immediately to get the ball rolling and take advantage of the full 30 percent credit!

The Process

Here’s an example: 

Let’s say you made $50,000 last year and you owe $10,000 in federal income taxes. You’ve already paid $7,800 (taken out of your paychecks), so assuming you don’t have any other tax credits, you’ll owe the IRS $2,200. 

Now, let’s say you purchased a solar PV system last year for $20,000. The ITC qualifies you for a tax credit of $6,000 (30 percent of $20,000). This tax credit reduces your federal income taxes owed from $10,000 to $4,000. Since you’ve already paid $7,800, you’ll receive a tax refund of $3,800!

Keep in mind that the ITC only applies to those who buy their system with cash or a solar loan, applies only and directly to your federal tax liability, and you must have enough income for the tax credit to be relevant (the credit can be split over multiple years). 

The Federal MACRS & Bonus Depreciation

Right now under the federal Modified Accelerated Cost Recovery System (MACRS), commercial businesses can recover investments in certain property types (like solar photovoltaic systems) through what’s called “depreciation deductions.” The MACRS creates a lifespan schedule for various types of property over which the property’s value may be depreciated. For solar PV systems, the taxable basis (net cost) of the equipment must be reduced by 50 percent of any federal tax credits associated with the system.

The traditional solar depreciation schedule under MACRS is 5 years. Additionally, if taking the 30 percent ITC, the depreciable basis must be reduced to 85 percent of the system cost. For example, for a $10000 array you are able to depreciate $8500 instead of the full $10000.

In addition, there’s also a 30 percent Bonus Depreciation provision (an option for systems placed before the end of 2019). This means that in the first year of service, companies can elect to depreciate 30 percent of the base while the remaining 70 percent is depreciated under the normal MACRS schedule through 2022. With this bonus depreciation, you get to deduct more of the expense within the first year, which can help alleviate much of the upfront costs associated with your new solar investment.

In addition, there’s also a Bonus Depreciation provision (an option for systems placed before the end of 2019). This means that in the first year of service (through 2022) companies can elect to depreciate 100 percent of the depreciable basis. With this bonus depreciation, you get to deduct more of the expense within the first year, which can help alleviate much of the upfront costs associated with your new solar investment. After 2022, bonus depreciation phases out 20% per year through 2026.

The Process

Here’s an example: 

Let’s say you own a commercial business, farm, or even have an at-home business (like in-home daycare or a home office) and you install a solar PV system to your rooftop for $10,000. With the Federal Investment Tax Credit (ITC), you can only depreciate up to 85 percent of the total value of the array (versus 100 percent of the value). 

Traditionally, you’d need to depreciate on a schedule. So instead of being able to write off the full $8,500 in year one and capture the tax savings quickly, you’d need to put the array on a five-year schedule and deduct $8,500 across five years. 

With $8,500 in tax savings, you’d realize: 

  • $1,700 in year one
  • $2,720 in year two
  • $1,632 in year three
  • $979.2 in years four & five
  • $489.6 in year six 

However, with the additional MACRS Bonus Depreciation option and the ITC, with that same array you would receive $3,000 in ITCs and are able to further write off $8,500. Then the bonus depreciation program is on a scheduled phase out beginning in 2023.

Essentially, this program of Bonus Depreciation allows you to accelerate your depreciation and provides a vehicle to capture the tax savings immediately, versus requiring it to be spread out across a six year period. 

We hope you found this guide useful. We’re always here to help answer any questions or offer a site consultation! And remember, going solar is a major decision, so exercise the same caution you would when making other major decisions and consult with an accountant or tax professional first.