State of Hawaii Energy Conservation Tax Credit: This income tax credit allows a credit of 35 percent of the cost of equipment and installation of a solar electric system. The credit is to be applied in the year in which the system is placed in service. This credit is available for systems installed for commercial or industrial use, and there is a $500,000 maximum per year per system to the total amount of the credit. Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. (Department of Taxation Form N-342)

Federal Business Energy Tax Credit: The business energy tax credit is a 30 percent tax credit available to commercial businesses that invest in or purchase energy property in the U.S. Energy property includes solar and geothermal energy. The energy property must be operational in the year in which the credit is first taken. The property must also be constructed by the taxpayer and used by the taxpayer. Credit may not be taken if financing for the project is subsidized or from tax-exempt bonds. The tax credit is unlimited. The remaining credit may be carried back 1 year (up to 50% of the total credit amount) and any amount remaining may be carried forward up to 15 years. (IRS Form 3468)

Federal and State Accelerated Depreciation: An additional incentive for businesses to go solar electric is the Modified Accelerated Cost Recovery System (MACRS). Under MACRS, businesses can recover investments in solar electric equipment through depreciation deductions. For solar electric equipment, the current MACRS property class is five years. (For more information, read IRS Publication 946 or Form 4562)

Please note that the tax incentive calculations are based on our understanding of the new energy conservation credits described in the SEIA Guide to Federal Tax Incentives for Solar Energy. Please click on the link below to download the manual or consult your tax professional. You can also e mail your tax questions to Levin and Hu CPA Doug Levin for more info.

State of Hawaii Renewable Technologies Income Tax Credit: This income tax credit allows a credit of up to 35 percent of the cost of equipment and installation for solar thermal and electric systems. The credit is to be applied in the year in which the system is placed into service, and is limited to $5,000/system/year ($2,250/system/year for solar thermal). Tax credits that exceed the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. (Department of Taxation Form N-334). Last July, the State of Hawai'i also allowed filers to elect to take the credit as a refund, for a 30% lesser amount, unless certain income requirements are met (link to Act 154).

Federal Investment Tax Credit: The federal tax credit covers 30% of equipment and installation costs for solar thermal and electric systems. The tax credit is unlimited, applicable to the tax-year the system is placed into service, and remaining credits may be carried back 1 year (up to 50% of total) and/or carried forward until exhausted, for up to 15 years. (IRS Form 3468)

Please note that the tax incentive calculations are based on our understanding of the new energy conservation credits described in the SEIA Guide to Federal Tax Incentives for Solar Energy. Please click on the link below to download the manual or consult your tax professional. You can also e mail your tax questions to Levin and Hu CPA Doug Levin for more info.