What solar rebates and incentives are available in New Jersey?

Q: What solar rebates and incentives are available in New Jersey?

There are currently four solar incentives available to homeowners in New Jersey. The first solar incentive is the investment tax credit (ITC), which currently allows you to deduct 30 percent of the cost of your solar energy system from your taxes. The second incentive is the Solar renewable Energy Certificate (SREC) program, followed by sales tax exemption and property tax exemption.

1- The Solar Investment Tax Credit (Residential Renewable Energy Tax Credit)

Here, the taxpayer may claim a Residential Renewable Energy Tax Credit for qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner.

Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

How much is the Tax Credit worth?

For Solar-electric property, A taxpayer may claim an investment tax credit of:
- 30% for systems placed in service by 12/31/2019
- 26% for systems placed in service after 12/31/2019 and before 01/01/2022
- 30% for systems placed in service after 12/31/2021 and before 01/01/2033
- 26% for systems placed in service after 12/31/2032 and before 01/01/2034
- 22% for systems placed in service after 12/31/2033 and before 01/01/2035
There is no maximum credit for systems placed in service after 2008. Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2034. The home served by the system does not have to be the taxpayer’s principal residence.
As long as you purchase and own your solar energy system, you're eligible for the solar panel tax credit. Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect.
Remember, if you sign a solar lease lease or Power Purchase Agreement (PPA), you are not the owner of the solar panel system, so you cannot receive the tax credit.
Note: Section 13302 of The Inflation Reduction Act of 2022 (H.R. 5376) extended the expiration date and modified the phase down of this tax credit. It also made stand-alone energy storage systems eligible for the credit, and biomass heaters ineligible for the credit. Biomass heaters are now eligible for the residential energy efficiency tax credit. The summary below reflects the credit after the enactment of H.R. 5376.

2- Solar Renewable Energy Certificates (SRECs)?

New Jersey Board of Public Utilities (BPU) unanimously approved the highly anticipated Successor Solar Incentive Program (“SuSI Program”). The SuSI Program will support the development of 3,750 megawatts (MW) of new solar generation by 2026, effectively doubling the state’s current solar capacity and driving solar to become approximately 10 percent of the state’s total electricity supply.
The SuSi program works just like NJ’s previous SREC and TREC programs: the incentive program is production-based, and you earn certificates–called SREC-IIs–for every 1,000 kWh your solar panel system generates. But unlike with the original SREC program, the value of a SREC-II is fixed and depends on the type of installation and the size of the system you install – similar to a TREC.
SREC-II’s are sold independently from electricity, so, you will still earn the money you normally would through your utility’s net metering program. SREC-II’s just earn you additional money on top of that.
As a homeowner installing a residential system, you are in the ADI program, and you'll earn $85 for each SREC-II your system generates. So, if your system generates 10,000 kWh a year, you will earn $850 on top of your energy savings.
Your SREC-II's will be generated for 15-years from the date your system receives permission to operate from the utility company.

3- Solar Energy Sales Tax Exemption

New Jersey offers a full exemption from the state's sales tax (currently 7%) for all solar energy equipment. This exemption is available to all taxpayers. All major types solar energy equipment, including equipment for passive solar design, are considered eligible for the exemption as described by the New Jersey Division of Taxation Publication S&U-6 (Sales Tax Exemption Administration). According to S&U-6, the exemption includes all solar energy "devices or systems specifically approved by the Board of Public Utilities, Division of Energy and designed to provide heating or cooling or electrical or mechanical power by converting solar energy to some other usable energy source, including devices for storing solar-generated energy." The exemption does not apply to devices that would be required regardless of the energy source being utilized. In order to claim the exemption, the purchaser must fill out and submit Form ST-4 (Exempt Use Certificate) to the seller instead of paying sales tax. Rear More Here.

4- Property Tax Exemption for Renewable Energy Systems

In October 2008, New Jersey enacted legislation exempting renewable energy systems used to meet on-site electricity, heating, cooling, or general energy needs from local property taxes. (There is not a state component to property taxes in New Jersey). Eligible renewable energy systems* include solar PV, wind, fuel cells, sustainable biomass, geothermal electric, landfill gas, hydroelectric, resource recovery, wave, and tidal systems that produce electricity. Systems that produce energy from solar thermal energy (e.g., solar hot water) or geothermal energy (e.g., geothermal heat pumps) are also eligible for the exemption. The exemption may be claimed for all qualified systems installed on residential, commercial, industrial, or mixed use buildings as accessory uses.

In order to claim the exemption, property owners must apply for a certificate from their local assessor which will reduce the assessed value of their property to what it would be without the renewable energy system. Exemptions will take effect for the year after a certification is granted. The New Jersey Department of Treasury, Division of Taxation is required to develop the rules and regulations necessary to implement this law. According to the law, rules relating to the technical qualifications for eligible renewable energy systems will be developed by the New Jersey Board of Public Utilities (BPU) and the Commissioner of Community Affairs. The Department of Community Affairs (DCA) has determined that the existing Uniform Construction Code, which requires compliance with a manufacturer's instructions in cases not specifically covered by the code, is a sufficient basis for determining whether or not a system qualifies for the exemption. Thus, as of this writing detailed technical standards are not expected.

The New Jersey Division of Taxation has developed an Application for Certification of Renewable Energy Systems. Prospective applicants should direct questions about the law to their local assessor. Read More Here.

*Biomass, hydroelectric, and resource recovery facilities must meet environmental standards as defined by the New Jersey Department of Environmental Protection and minimize environmental and community impacts.

To see mode details about the solar power state rebates, please visit http://www.dsireusa.org/

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