Reasons to Put Solar on Your Investment Property

With the reduction of solar installation costs, the extension of the Investment Tax Credit, and new choices becoming more popular with renters, solar is increasingly attractive to property owners. Indeed, landlords can benefit immensely from installing solar, batteries, and electric vehicle chargers, but only in certain cases. Does your property qualify?

TAX CREDIT

While you should consult your own tax advisor, most CPAs with which I’ve spoken agree that if you own the property in your personal name, and rent it out for income, then you’re not eligible for any tax benefits. This falls under IRC 25 D which covers the tax code related to solar investments for residential property. 

However, if you own the property under a non-personal entity like an LLC or Trust, then it falls under IRC 48 which covers commercial entities and you’re eligible for both the tax credit and depreciation expense write-offs. This is a huge financial benefit for improving your property with clean energy!

DEPRECIATION EXPENSE

When you install solar panels on your investment property, you can claim accelerated depreciation on the value of the asset. This schedule is changing over the next couple years, so please consult your tax advisor. 

It’s “accelerated” because you get to claim all the tax benefits for depreciation over 5 years, while solar installations last much longer. If you purchase a high-quality solar system and it’s installed properly, it should be warranted for twenty-five years and can last decades more.

IMPROVED PROPERTY VALUE

Having solar panels on your investment property helps in attracting better tenants. In areas that suffer regular power outages or are subject to time-of-use billing from the local utility, a battery can add value as well. And with electric vehicles becoming more and more popular, consider an EV charger to attract just the right tenants!

Tenants are willing to pay more rent for properties with solar and other amenities that matter to them. Your tenants can benefit from electricity savings, energy security, and at-home vehicle charging. You receive additional rent.

The additional rent is your mechanism to pay back the costs of purchase and installation of the solar system. Factoring the market-rate rent increases leaves several years of gains. This boosts the bottom line of your property.

STATE, UTILITY, OR LOCAL REBATES

While becoming less common due to how affordable solar is nowadays, there are still several local and state governments and utility entities that offer rebates. A well-informed solar consultant can help you learn about and apply for these rebates.

Do you have an investment property which is either residential or commercial premises? Contact us now for a design and an offer specific to your needs and consistent to your financial objectives.