Tax Credit Summary

North Carolina Renewable Energy Tax Credit

North Carolina offers a tax credit of 35% of the cost of renewable energy property constructed, purchased or leased by a taxpayer and placed into service in North Carolina during the taxable year. These tax credits were scheduled to sunset date on December 31, 2005, but in September 2005 were extended for another five years.  The credit is subject to various ceilings (as shown above) depending on the type of renewable energy system.  Although the focus of this fact sheet is residential solar projects, note that the NC tax credit also applies to wind, hydroelectric, biomass, and biofuels equipment.  The maximum credit for eligible non-residential renewable energy equipment is $2.5 million for equipment placed in service in 2006 through 2010.  (The maximum credit was previously $250,000.)

Expenditures eligible for the tax credit include the cost of the equipment and associated design, construction costs and installation costs less any discounts, rebates, advertising, installation assistance credits, name referral allowances or other similar reductions.  Under North Carolina's tax code, the allowable credit may not exceed 50% of a taxpayer's liability for the year, reduced by the sum of all other credits. Single-family homeowners who purchase and install a qualifying renewable energy system must take the maximum credit amount allowable for the tax year in which the system is installed. If the credit is not used entirely during the first year, the remaining amount may be carried over for the next five years.

Click on the links below to see the North Carolina Solar Center's Official Documents:

NC Residential Solar Tax Credits

NC Commercial Solar Tax Credits

FAQ of NC Solar Tax Credits

New Federal Solar Tax Credits

Solar Energy Systems

What are the tax incentives for residential solar systems?

Homeowners are eligible for tax credits for qualified solar water heating and photovoltaic systems.  Solar water heating systems produce hot water, photovoltaic systems produce electricity.  Businesses are eligible for similar credits for solar equipment, including certain solar lighting systems.  The credits are available for systems “placed in service” in 2006 and 2007.

Who is eligible for the tax incentives?

The tax credits go to individuals who install qualifying systems on homes they use as a residence, and to businesses that install solar equipment for their use.

What are the incentives and how do they work?

The tax credits are for 30% of the cost of the system.  For individuals the maximum credit is $2000 for photovoltaic systems and $2000 for solar water heating systems in any tax year.  To qualify, residential systems must meet certain criteria as follows:

Solar water heating:

  • System must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the state government in which the system is located.  SRCC is an organization set up by the solar industry to test and certify equipment so purchasers have an independent assessment of system performance www.solar-rating.org

  • At least half of the energy used by the system to heat the water must be solar energy.  The credit is not available for expenses for swimming pools or hot tub

Photovoltaic systems:

  • System must provide electricity for the residence, and must meet applicable fire and electrical code requiremen
What do I have to do to qualify for these incentives?

Implementing regulations are now being developed by the IRS.  We will post a link on this site as soon as these regulations are available.  To qualify, tax payers will probably need to have evidence regarding:

  • the cost of the system (including labor and piping or wiring to connect the system to a home’s plumbing and/or electrical systems),
  • when it was placed in service,
  • whether the system meets the qualifying criteria discussed above.
Where can I learn more about qualifying products?

Good sources of information about these systems include: