Solar Tax Incentives and Net Metering for South Carolina Residents

Overview

South Carolina currently is one of the best states to go solar in for a few reasons. One obvious reason is that the Palmetto State receives an abundance of sunshine, which you can harness to power your home’s electric needs.

South Carolina homeowners have the best tax incentives in the US to go solar. Every homeowner who purchases a solar energy system in the United States is eligible for a 30% federal tax credit on the cost of an installed solar system. South Carolina residents can also take advantage of a 25% state tax credit based on the cost of their home’s solar installation. When you combine both of the tax incentives, you can receive 55% in tax credits to offset the cost of your solar system.

In this article, I will cover how to take advantage of these tax credits. I will also explain net metering and the state of net metering in South Carolina.

• If you are a SC resident, and you are considering going solar after reading this article, let’s talk. Just a quick, friendly call to see if you could benefit from solar.
• If you know someone who is interested in going solar within any state within this coverage map, we have a referral program where you will get $1,000 for every customer you refer.

Federal Solar Tax Incentive (30% of System Cost)

Every homeowner in the United States is eligible to receive a 30% non-refundable federal tax credit based on the cost of an installed solar energy system on their home. I covered this topic more thoroughly in a previous article I wrote, Understanding the Residential Federal Solar Tax Credit, so I won’t go to in-depth about the federal solar tax credit here. I also made a YouTube video covering the federal solar tax credit.

Here are some key points on how the federal tax credit works.

• Homeowners who purchase their solar system up front or through financing receive a 30% non-refundable tax credit that can be used to pay their federal income tax liability.
• The calculation of the 30% credit is based on the cost of the components of the solar system and the labor needed to install it.
• Homeowners who lease their solar system are not eligible for the tax credit. PPA (power purchase agreements) are also not eligible.
• You will not receive a check from the federal government. Homeowners can only use their tax credit to pay off taxes they owe to the federal government.
• You can roll over the credits to offset the taxes of the following year if the solar credit exceeds your taxes in the year you installed the system. You can do this for multiple consecutive years.

Again, for a more complete overview of the federal solar tax credit (also called the ITC) please refer to this article. I also have a video you can view on YouTube covering the federal solar tax credit.

South Carolina’s State Tax Incentive (25% of System Cost)

South Carolina residents are also can receive generous state tax credit in addition to the federal tax credit. The South Carolina solar tax credit 25% based on the total cost of your home’s solar installation.

Like the federal tax credit, the SC tax credit is non-refundable. This means that you can only use the South Carolina tax credit to pay your income tax liability to the state of South Carolina.

The form for filing the South Carolina solar tax credit is SC SCH.TC-38 and you can view it here. There are a few rules you as a homeowner need to keep in mind if you are going to tax advantage of South Carolina’s solar tax credit.

• The amount of the credit in any year may not exceed $3,500 for or 50% of the taxpayer’s tax liability for that year, whichever is less.
• The taxpayer may carry forward, or “roll-over” any excess credit for up to 10 years.
• The taxpayer may not claim the credit before installation is complete.
• The Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the State Energy Office must certify for performance of the solar installation.

As an example, let’s say you install a $30,000 solar system on your home in South Carolina. First, let’s calculate the 30% federal tax credit you could be eligible to receive.

Example for federal Tax Credit: $30K X .3(or 30%) = $9k

Next, let’s calculate the 25% state tax credit you could be eligible to receive from South Carolina.

Example of SC Tax Credit: $30K X .25 (or 25%) = $7.5K

Finally, let’s add the federal and state credit to see how much your total tax credits from both the federal government and the SC state government would be together.

Combined Tax Credits: $9K (federal) + $7.5K (state) = $16.5K Total

If you take advantage of both these tax credits, you could save $16,500 off your $30,000 solar installation in South Carolina.

Keep in mind that you can only claim $3,500 or 50%, whichever is less, of your South Carolina state tax credit for each year. In our example above, we can claim $7,500 in non-refundable tax credits for South Carolina for our solar installation.

• If you owe $7,000 or more each year in state income taxes in SC, you can claim the full $3,500 yearly limit of your SC solar tax credit because $3,500 is 50% of the $7K you owe in state taxes. You would then roll over your credits and pay off another $3,500 the next tax year. In the third tax year, you would use the remaining $500 in state tax credit to finish using your full $7,500 of state tax credits. 1st year $3,500 + 2nd year $3,500 + 3rd year $500 = $7,500 total
• If you generally owe only $2,000 in income taxes to South Carolina each year, you can only use 50% of your tax credit, or $1,000 each year. In this case, you would take 8 years to use your full state tax credit. You would claim $1,000 in tax credits for seven years, then you would claim the remaining $500 in the eighth year after your solar installation. Remember, you can only roll over the tax credit for up to ten years in South Carolina.

As you can see, the nuances of using the tax credit can get complicated, and I highly recommend you to consult with your tax professional to understand your personal situation. This article only provides a general overview of how the tax credit could work in unique examples.

Net Metering in South Carolina

Net metering, or NEM (Net Energy Metering), is a setup where your home’s solar energy system links to the utility grid, transferring excess power to the grid through a bidirectional meter. A home’s solar system generates this excess power during the peak hours of the day. The utility company will buy your home’s excess electricity and give you credits to draw electricity from the grid when the sun is not shining without being charged.

Basically, when your solar system is tied to the grid and using net metering, the grid is acting like a battery to store excess energy. If you want to go more in depth on the topic of net metering, you can read my article “An Overview of Net Metering for Residential Solar” or you can watch my YouTube video on Net Metering.

The most ideal form of net metering for homeowners is one-to-one (or 1:1) net metering. With one-to-one net metering, the utility company pays the same amount for the electricity you send to the grid as you pay to purchase from the grid.

The average price per kWh for electricity in South Carolina is 12.9 cents. If you were on 1:1 net metering, the utility company would pay homeowners the same 12.9 cents per kWh for electricity sent into the grid from their solar system. Utility companies don’t like 1:1 net metering because they make their profits by buying electricity at a wholesale price and then they sell it to homeowners at a retail price. They don’t want to pay retail when they buy solar energy produced by homeowners, utilities want to pay wholesale prices.

South Carolina’s largest utility provider serving over 700,000 households is Dominion Energy. Dominion still offers 1:1 net metering for residential solar if you enroll in their Solar Choice program. Dominion Enrgy South Carolina (DESC) customers will consume self-generated power during the day and will be credited for excess energy delivered to the grid based upon the on-peak and off-peak periods defined by DESC’s time of use rates. You can view DESC’s Solar Choice rider here. This is great news for DESC customers. It may be a smart move to take advantage of Dominion’s net metering program and get enrolled in their Solar Choice program now.

Unfortunately, Duke Energy in South Carolina has switched from 1:1 net metering for new customers to net billing. Net billing differs from net metering because utilities using net billing buy excess energy from solar producing households at a lower rate than they sell it.

Duke Energy solar customers are charged differently for power they draw from the grid based on the time of day they use their electricity. Duke Energy also bases the credit for excess energy on the time of day its customers send it back to the grid. However, they pay far less for the excess energy delivered from your house to the grid. Here are the rates based on this rider from Duke Energy’s website. I just spent 30 minutes on hold with Duke to make sure this information was correct (02/07/2024)!

As you can see, this is not 1:1 net metering, and it’s not a fair exchange for homeowners in South Carolina for Duke Energy customers. Depending on your local utilities buyback rates, you may consider adding battery storage to your home’s solar system instead of relying on just net metering.

South Carolina’s net metering programs will differ according to your local utility. Call us at 262-303-1346 or book an appointment here and we can help you find out your local utility’s net metering situation.

Battery Storage as a Solution to Net Billing

• Battery storage gives you emergency back-up power when the grid is down. Grid-tied solar systems without a battery shut down when the grid goes down to prevent electricity from flowing into the grid and electrocuting linemen or bystanders.
• Battery storage allows you to make better usage of your excess solar energy production when not on a 1:1 net metering plan.
• South Carolina residents can claim tax credits on the additional costs of a battery storage system. Using the SC tax credit would make the expense of a battery cheaper than any other state. You will also get a bigger federal tax credit to offset the cost of a battery storage system.
• Battery technology has advanced rapidly in recent years, giving homeowners superior systems at competitive prices.
• You can also choose to design a completely off-grid solar system with battery storage and never deal with a utility company again.

Conclusion

South Carolina has one of the best state incentives for homeowners considering going solar. Besides the 30% federal solar tax credit available to all US residents, South Carolina residents are eligible for an additional 25% tax credit. The net metering policies may not be ideal for all utilities in the state, but battery storage is a splendid solution with great additional benefits.

I hope you enjoyed this article! Here are some next steps you take:

• If you are interested in going solar, let’s talk. Friendly, no-pressure, no BS.
• If you know someone who is interested in going solar in any state in our coverage map, we have a referral program where you will get $1,000 for every customer you refer.
• Visit my YouTube Channel and subscribe.
• Visit my Facebook page and follow.

-Brian Walker