What good is a 30% tax credit if you don't make enough to pay federal income tax?

[electricpotato]

So, as I understand it the federal incentives offered for putting renewable energy systems on your home are essentially just tax breaks, money taken off your federal income tax bill. Correct me if I am wrong. But what if, like me for most of my adult life and many others in the same position who might be interested, you don't earn enough to have to pay income tax? Why is this perk unavailable to those who most need it? I guess this is more of a political/philosophical question than a technical one, but I found myself musing at how broken our tax code is and how poorly designed most incentives for making good decisions for the environment are. Am I the only one who thinks this way? I"m getting ready to buy a $30K house in a low income part of Chicago, where many of the residents would surely benefit from having self sustaining renewable energy for their homes but many of them probably would not benefit from the tax incentives. Instead, many people end up seeking government assistance to help them pay their utility bills. ??? does this scenario make sense to anyone else? Why not just a simple rebate, available to anyone?

[Ian S]

Well, I suppose the odds are that someone who doesn't make enough to pay income taxes is unlikely to be able to afford the 70% cost of the solar system that is left after the tax credit. For someone in that position, they may be better served looking into either a no-money-down lease or a prepaid lease both of which have the tax credit benefits for the lessor. Some of those benefits usually makes their way to the lessee in the form of lower lease payments.

[electricpotato]

Well, I suppose the odds are that someone who doesn't make enough to pay income taxes is unlikely to be able to afford the 70% cost of the solar system that is left after the tax credit. For someone in that position, they may be better served looking into either a no-money-down lease or a prepaid lease both of which have the tax credit benefits for the lessor. Some of those benefits usually makes their way to the lessee in the form of lower lease payments.

Or perhaps someone who doesn't have a lot of income, but who has some savings and wants to make a decent investment in their future by purchasing a system that could keep them in electricity for years to come to offset their low income. I think your assumption is the same one the government makes, but I'm not sure its a good one, especially in this economy when unemployment is high and there are probably a lot of people with the gumption and expertise to build their own solar array allowing them to get out from under the utility companies if only they could get a little more assistance and less overpriced oversight from local authorities whose main job is to provide revenue for the city or county (this is perhaps my bitterness about being a Chicagoan, where corruption and graft are rampant). Don't get me wrong, I am all for reasonable oversight for safety reasons, but it shouldnt cost what it does to get an inspector to come out and check the connections, look at the paperwork on the equipment used and certify a DIY installation as safe to use. Why should this service cost more than $50? I used to own a small coffee shop in Iowa. It cost me $150 for my food service license there. Here it would cost me $6K for the same license. Ridiculous.... sorry, I rant sometimes.

[Sunking]

Let's put it this way. Solar incentives is for the people who can afford solar without the poor mans money. So if you do not make enough money to pay taxes, you darn sure cannot afford solar. Solar is paid for by artificially inflated taxes and electrical rates. We call it wealthy Welfare or Corporate Welfare. It comes off the poor and working mans back. Solar as an investment is as poor of an investment you can make. $10,000 in a solar system nets you 0% return in 10 years. Just as well bury it in the back yard. $10,000 in a good mutual or Investment fund will double or tripple and you get real cash or $20 to $30K, enough to pay for th electric bill the rest or your happy retired life.

[Ian S]

Or perhaps someone who doesn't have a lot of income, but who has some savings and wants to make a decent investment in their future by purchasing a system that could keep them in electricity for years to come to offset their low income.

That's why I suggested the prepaid lease. If you have the money to put into solar but not enough federal tax liability for the tax credit, then the prepaid lease will likely work. It did for me. My investment in solar is, in effect, like a long term 20 year loan made to the utility. They pay me back over 20 years in the form of a reduced electric bill. The "payment" is about $100/mo. The effective annual interest rate works out to about 17% and the return is tax free. YMMV.

[silversaver]

So, as I understand it the federal incentives offered for putting renewable energy systems on your home are essentially just tax breaks, money taken off your federal income tax bill. Correct me if I am wrong. But what if, like me for most of my adult life and many others in the same position who might be interested, you don't earn enough to have to pay income tax? Why is this perk unavailable to those who most need it? I guess this is more of a political/philosophical question than a technical one, but I found myself musing at how broken our tax code is and how poorly designed most incentives for making good decisions for the environment are. Am I the only one who thinks this way? I"m getting ready to buy a $30K house in a low income part of Chicago, where many of the residents would surely benefit from having self sustaining renewable energy for their homes but many of them probably would not benefit from the tax incentives. Instead, many people end up seeking government assistance to help them pay their utility bills. ??? does this scenario make sense to anyone else? Why not just a simple rebate, available to anyone?

You can carry the deduction to following years