Master Thread: Energy products and Tax discussions

[jjrandorin]

Moderator note:

Creating this master thread for discussions of energy products and Taxes, as this question comes up frequently (especially around the end of the year).

Because of the way the forum software works, if we take separate threads and merge them, the software merges posts by date, so the discussions can get lost. I will post links to some recent discussion threads about the tax credit, and would ask that all further discussion around that topic happen in this thread.
==================================

Some recent links about Energy products and tax credits. If there are others that should be included in this list of links, please let me know and I will add them.

2020 tax credit
New Solar Roof owners - how much can we write off in taxes?
Looking for Tax Credit Clarification
Massachusetts SMART and Connected Solutions Tax Implications?
Possible Extension of the ITC
2020 tax rebate?
Solar Tax Credit

 

[jrweiss98020]

I just got an e-mail from my solar installer. It said an extension of the 26% tax credit into 2021 is part of the current Covid relief bill. Apparently they also need work, so they are offering discounts. I'm awaiting an estimate for an expansion...

 

[SoCalNick]

Can anyone tell me the current status on tax credits for Powerwall products.

i want to add a powerwall (2) to an existing Solar (non-Tesla) house.
I use SoCal Edison.

What tax credits am I likely to get?
Are there any income restrictions?
Do any of the programs expire in 2021 (ie I missed them as I cannot complete in time.)

Thanks.

 

[d21mike]

I got solar and power wall (2) for about $50k in 2019 which had a 30% tax credit on the full $50k. So $15k credit. That credit was reduced for 2020 and will keep reducing just not sure how fast. You can Google most likely. It is on your federal return not California. No wage restriction on the credit. Now not sure if buying the power walls after you already got solar. Maybe others will know. The other restriction is unless during storm watch you can only charge batteries from solar because of credit I assume.

 

[SaveOurPlanet]

If you can get them installed in 2021 you should get 22% tax credit regardless of income, not sure if credit can be carried over to the following year if your tax liability is lower. If the stimulus bill get passed with the solar tax credit extension then you will get 26% if installed by 2022.

 

[Ampster]

not sure if credit can be carried over to the following year if your tax liability is lower.

I bought a Model 3 the same year I installed the solar panels and part of that credit rolled over. i do not know how it was allocated.

 

[jjrandorin]

Can anyone tell me the current status on tax credits for Powerwall products.

i want to add a powerwall (2) to an existing Solar (non-Tesla) house.
I use SoCal Edison.

What tax credits am I likely to get?
Are there any income restrictions?
Do any of the programs expire in 2021 (ie I missed them as I cannot complete in time.)

Thanks.

(moderator note: Moved to master thread, to keep tax discussions in one place.)
==============================

What energy provider you have doesnt have anything to do with Federal Tax credits. I suspect you are asking two different things.

1. Federal Tax credit should be 22% in 2021, but there could be changes depending on what the new administration is able to get through. That has nothing to do with your energy provider.

2. Since you mention you have SCE you may also be asking about the SGIP rebate, which is a California only program. If you are adding "A" powerwall (as in 1 ), The SGIP program for 1-2 powerwalls is over subscribed and you are unlikely to get any SGIP rebate for 1-2 powerwalls. Definitely not from tesla itself installing it, and almost certainly not from any third party installers doing 1 -2 powerwalls.

If you qualify for the equity and resiliency program, the above may not apply, however that program is also oversubscribed.


TL ; DR - Federal tax credit should be 22% next year, and dont plan on getting any SGIP rebate unless you are in the equity and resiliency program, and if you are in that program, its doubtful to me that you would get installed by the end of next year.

 

[wjgjr]

The current code related to the residential credit can be found here: 26 U.S. Code § 25D - Residential energy efficient property

As others noted, the current credit is 26%, dropping to 22% next year (unless legislation changes that, which is very possible.) The credit itself has no income limits, and it can be rolled over:

If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.

 

[h2ofun]

(moderator note: Moved to master thread, to keep tax discussions in one place.)
==============================

What energy provider you have doesnt have anything to do with Federal Tax credits. I suspect you are asking two different things.

1. Federal Tax credit should be 22% in 2021, but there could be changes depending on what the new administration is able to get through. That has nothing to do with your energy provider.

2. Since you mention you have SCE you may also be asking about the SGIP rebate, which is a California only program. If you are adding "A" powerwall (as in 1 ), The SGIP program for 1-2 powerwalls is over subscribed and you are unlikely to get any SGIP rebate for 1-2 powerwalls. Definitely not from tesla itself installing it, and almost certainly not from any third party installers doing 1 -2 powerwalls.

If you qualify for the equity and resiliency program, the above may not apply, however that program is also oversubscribed.


TL ; DR - Federal tax credit should be 22% next year, and dont plan on getting any SGIP rebate unless you are in the equity and resiliency program, and if you are in that program, its doubtful to me that you would get installed by the end of next year.

Comments I have heard is since they took money out of the ER stuff, if one is on the waiting list, odds of getting anything is very slim.
Yep, and even if approved, who knows when one will get batteries.

 

[jboy210]

According to this and other articles, the 26% tax credit will now run until 2022. Any thoughts on whether this will slow demand for solar installs?

 

[chrstna4]

Humans tend to procrastinate so I’d say it might slow it down until July 2022 and then there will be a big rush to get projects done and people complaining they can’t get their project scheduled before the end of the year (just based on what I observed when the tax credit was set to expire at the end of 2020).

 

[wjgjr]

I had said before I thought it would have made more sense to make the step-down more gradual (possibly going 26/24/22/20 or 26/22/18/14 instead of the 26/26/26/22 that currently exists for 2020-2023.) It might have helped avoid the risk of procrastination and reflect that the cost of solar is getting cheaper as the technology improces. From a pure monetary standpoint, it is very possible that waiting until mid-2022 will give you the best return (you will lose the potential production for the next year+ but have more chance of a cheaper and/or more efficient system.)

What I think will be interesting is to see how manufacturers/installers respond. Since this is a Tesla forum, talking specifically about them, we have seen Tesla respond to past drops in federal incentives by also cutting the prices of their offerings. I had expected them to do likewise for 2021. With this change, will Tesla and other manufacturers still reduce prices or will they increase margins, assuming their manufacturing costs are getting cheaper over time? Right now, it seems like Tesla is very busy, so they may not have a need to reduce prices. But, if and as business does slow in 2021, things might change.

Overall, I would expect this change to increase aggregate demand for solar in 2021-2023, but it may slump in 2021 before picking up in 2022.

 

[nickw252]

I think demand may continue to be stable or increase in large part due to more and more people working from home, and this trend likely continuing. People are therefore using more energy at home, and with time of use plans (like what we have in AZ), it makes so much sense to have solar because panels are generating the most power when electric is most expensive and when you want to run your AC.

The tax credit is just icing on the cake.

 

[wjgjr]

The bill

I think demand may continue to be stable or increase in large part due to more and more people working from home, and this trend likely continuing. People are therefore using more energy at home, and with time of use plans (like what we have in AZ), it makes so much sense to have solar because panels are generating the most power when electric is most expensive and when you want to run your AC.

The tax credit is just icing on the cake.

There certainly may be other factors that drive demand, like what you mentioned. The economy will be another big factor since solar is a large investment. But I guess the question that was posed is the effect of the tax credit on demand, and I do think that relative to what it would have been otherwise, I could see the change reducing demand for 2021, even though the credit will be higher now, because there will be less urgency to buy now and because manufacturers may keep prices higher than they would have otherwise, effectively capturing part of the higher credit for themselves.

 

[jkdman123]

The 26% fed tax rebate has indeed been extended into 2021 and ‘22 by the COVID relief bill. It’s been signed. It’s official.

Now, for those of you who signed late last year for a Tesla roof, you need to be very aware of any changes they issue to your original contract. One of my best friends in PA signed with Tesla in July of last year. They quoted his costs based on his roof not being installed until this year and therefore assumed a 22% fed rebate. But since he can now take the 26% rebate, it should have lowered his total cost by $3500.

However, they just sent him a revised contract today that shows an increase of permitting costs of $4500 and a generic company rebate of $1000. So magically, his $3500 increase in savings is gone. This is *highly suspect* and he plans on trying to speak to someone about it tomorrow. So they’re basically saying they made a $4500 mistake on calculating the permitting costs on his original contract. Yea, right. And they just decided to kick in a $1000 rebate for the hell of it to *coincidentally* bring the total cost back to the original amount he was quoted.

 

[wjgjr]

The 26% fed tax rebate has indeed been extended into 2021 and ‘22 by the COVID relief bill. It’s been signed. It’s official.

Now, for those of you who signed late last year for a Tesla roof, you need to be very aware of any changes they issue to your original contract. One of my best friends in PA signed with Tesla in July of last year. They quoted his costs based on his roof not being installed until this year and therefore assumed a 22% fed rebate. But since he can now take the 26% rebate, it should have lowered his total cost by $3500.

However, they just sent him a revised contract today that shows an increase of permitting costs of $4500 and a generic company rebate of $1000. So magically, his $3500 increase in savings is gone. This is *highly suspect* and he plans on trying to speak to someone about it tomorrow. So they’re basically saying they made a $4500 mistake on calculating the permitting costs on his original contract. Yea, right. And they just decided to kick in a $1000 rebate for the hell of it to *coincidentally* bring the total cost back to the original amount he was quoted.

That does seem rather questionable if there is no other explanation for the change. While I'm sure Tesla would love to make more off of this and any other contracts they pushed assuming the 22% rebate number, they put the numbers out there knowing what they would get from the job and were willing to do it. That the rebate will now be 26% doesn't change Tesla's cost (and they always tell us that the risk of any issues with the ITC is on the customer.)

Does your friend have a solar-only install, or does it include powerwalls? The $1k discount seems to be standard for solar + PW installed at the same time.

 

[gpez]

The 26% fed tax rebate has indeed been extended into 2021 and ‘22 by the COVID relief bill. It’s been signed. It’s official.

Now, for those of you who signed late last year for a Tesla roof, you need to be very aware of any changes they issue to your original contract. One of my best friends in PA signed with Tesla in July of last year. They quoted his costs based on his roof not being installed until this year and therefore assumed a 22% fed rebate. But since he can now take the 26% rebate, it should have lowered his total cost by $3500.

However, they just sent him a revised contract today that shows an increase of permitting costs of $4500 and a generic company rebate of $1000. So magically, his $3500 increase in savings is gone. This is *highly suspect* and he plans on trying to speak to someone about it tomorrow. So they’re basically saying they made a $4500 mistake on calculating the permitting costs on his original contract. Yea, right. And they just decided to kick in a $1000 rebate for the hell of it to *coincidentally* bring the total cost back to the original amount he was quoted.

This shouldn't be surprising. If the scenario were reversed and the rebate went away entirely wouldn't your friend be asking for a discount to compensate?

Let's please stop pretending that demand side subsidies somehow change the underlying amount someone is willing to pay and acknowledge that they're actually for the companies that are providing the products and services (Tesla included of course). "Green energy tax breaks!" sound great until you realize every single penny is just lining corporations' pockets.

 

[gpez]

That does seem rather questionable if there is no other explanation for the change. While I'm sure Tesla would love to make more off of this and any other contracts they pushed assuming the 22% rebate number, they put the numbers out there knowing what they would get from the job and were willing to do it. That the rebate will now be 26% doesn't change Tesla's cost (and they always tell us that the risk of any issues with the ITC is on the customer.)

This is fundamentally the wrong logic to use from an economics standpoint. Tesla's cost to operate has almost nothing to do with the price they charge - it's entirely dependent on what people are willing to pay, which includes demand side subsidies such as the ITC.

The Effects of Subsidies on the Supply & Demand Curve (chron.com)

Demand-Side Subsidies
A subsidy that affects the demand side would actually shift the entire curve from one position to another, such as moving to the right or left. This differs from the curve staying in one spot but new data points causing it to steepen, for example. A certain supply-price equilibrium exists on the chart, but this equilibrium would shift in the presence of a subsidy.

In the case of a demand-side subsidy, this would entail an increase in price rather than an increase in the number of available homes. This subsidy would then become an additional profit for the housing suppliers.

(Bold mine)

 

[wjgjr]

This is fundamentally the wrong logic to use from an economics standpoint. Tesla's cost to operate has almost nothing to do with the price they charge - it's entirely dependent on what people are willing to pay, which includes demand side subsidies such as the ITC.

The Effects of Subsidies on the Supply & Demand Curve (chron.com)

Demand-Side Subsidies
A subsidy that affects the demand side would actually shift the entire curve from one position to another, such as moving to the right or left. This differs from the curve staying in one spot but new data points causing it to steepen, for example. A certain supply-price equilibrium exists on the chart, but this equilibrium would shift in the presence of a subsidy.

In the case of a demand-side subsidy, this would entail an increase in price rather than an increase in the number of available homes. This subsidy would then become an additional profit for the housing suppliers.

(Bold mine)

I am familiar with the concept and have previously argued that the effect of the extension is that Tesla will likely hold off on planned price reductions that I expected them to implement when the ITC was expected to fall from 26% to 22%. And while we could discuss the impact of the change on pricing and the elasticity of demand in the solar market, the problem is this is not an economics issue any longer - it is a contract issue. Tesla and a customer had an agreement to do a job for a certain amount. The change in the ITC does not change the terms of the contract, particularly since Tesla is clear in the contracts that the customer is responsible for claiming the ITC and Tesla is not involved, nor is it responsible, should the customer fail to qualify (beyond its standard representations that the system being installed is an eligible solar system.)

Whether or not Tesla has ways to get out of the contract may be a question for lawyers, but simply adding more into the permitting bucket, just in response to the ITC, is not acceptable. (And I do note that this assumes that is actually what happened, and it is not that there are other legitimate reasons the cost went up.)

 

[wjgjr]

This shouldn't be surprising. If the scenario were reversed and the rebate went away entirely wouldn't your friend be asking for a discount to compensate?

Let's please stop pretending that demand side subsidies somehow change the underlying amount someone is willing to pay and acknowledge that they're actually for the companies that are providing the products and services (Tesla included of course). "Green energy tax breaks!" sound great until you realize every single penny is just lining corporations' pockets.

Certainly if the situation was reversed, the friend would ask, because in the reverse case the friend is made monetarily worse off while Tesla is unchanged, but that still doesn't mean Tesla would be obligated to make a change. In any event, had Tesla been upfront about the change, it might have gone better with the customer than what apparently happened.

And I disagree with the statement that every penny is lining corporations' pockets. Certainly, companies are aware of these incentives, and they absolutely capture some of the incentive for themselves (which is as expected.) But to suggest every penny is lining their pockets implies that we would have anywhere near such a large solar market without these incentives. I think there is a reasonable discussion to be had over whether the phase-out of the ITC should have been lengthened or is perfectly matched to the pace of innovation (and cost reductions) in the marketplace, but I disagree with the overall characterization of the subsidy.

And, in the particular case of Tesla, both on the vehicle and solar side, I think they really did a great job, particularly compared to competitors, of using the credit as intended - using it to support significant innovation in the space that has benefited not just them but their customers (as well as contributing to the public good that the incentives were also intended to support.)