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Donald Trump’s solar tariff isn’t so bad for people considering home solar

Avatar for Ben Zientara
Published on 01/24/2018 in
Updated 01/25/2018
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Following the recommendations of the U.S. International Trade Commission (ITC), which found in October 2017 that imports of inexpensive foreign-made solar panels have caused substantial harm to U.S. solar manufacturers, President Donald Trump has decided to enact steep tariffs on imported solar panels. That sentence might sound scary, and there are certainly a lot of scary headlines out there about how Trump is killing the larger U.S. solar industry by helping struggling manufacturers, but don’t panic.

Yes it’s true that the solar industry employs hundreds of thousands of people, most of whom work in installation, and it’s also true that some people may lose their jobs in the industry because of these price increases. We’re not going to get into the politics of whether this is overall good or bad for the industry or the nation, but we are going to talk about what it means for our core readership: homeowners who want to install solar.

How will the solar tariffs affect homeowners?

When the tariffs take effect, February 7th, 2018, they’ll add 30% to the price of most imported solar panels (aka modules). That’s a pretty huge markup, but because module cost is only a small part of the overall cost of installing a system, the final price you’d pay to a solar installer will only go up by a little.

In an earlier article, we wrote about a typical 5-kW solar system costing $15,000, with solar modules representing about $1,750. A 30% increase in module price would translate to $525 more for the whole installation, which can be erased by about half a year of the electricity produced by the panels. That’s not so bad!

After 2018, the tariff will “step down” by 5% per year, ending at 15% through 2021. So that $500 premium goes down to about $250, and goes away after 2021, but you shouldn’t wait that long to install, because of the “other ITC”.

The other ITC

Yes, ITC stands for “International Trade Commission,” but it’s also the Federal Solar “Investment Tax Credit.” This ITC is a straight-up tax credit that reduces the cost of going solar by 30% as a tax credit the year after installation.

That’s 30% of the whole cost of the system, meaning that $15,525 system earns you a federal tax credit of $4,658 (rounded up, like the Feds do). The ITC is the most important reason to go solar sooner, because it too begins to “step down” as of the end of 2019.

Federal Solar Tax Credit Steps Down starting in 2019

It’s important to remember that date: even though the new tariffs will still be adding a few hundred bucks to your up-front solar costs, the 30% ITC reduces the total cost of your system. Many states also include other solar incentives, like additional tax credits rebates, and performance payments.

If you’ve been thinking about going solar, now would be a perfect time to get quotes from solar installers near you.

Last modified: January 25, 2018

4 thoughts on “Donald Trump’s solar tariff isn’t so bad for people considering home solar

  1. Avatar for John De Montfort John De Montfort says:

    Aren’t there a few home solar options that will not have to pay the tarrif? Like the solar tyle roof’s from Solar City/Tesla? Does First Solar sell it’s thin film panels to residential installers? They will not have the tarrif, are they cost competitive from a ROI- return on investment perspective?

  2. Avatar for Stanley Davenport Stanley Davenport says:

    Correct me if I am wrong on this but I was a salesperson for a small company and the one thing that bothered me the most about promoting the 30% tax credit was it only applied if you owed the government money. Normal everyday working people do not get the 30% tax credit. Yes or no?

    1. Avatar for Ben Zientara Ben Zientara says:

      Hey Stanley-

      Normal, everyday working people can certainly take the tax credit, unless the normally end up paying no taxes at the end of the year. Most working folks have paycheck deductions taken by their employers based on their estimated tax, which include Social Security and Medicare taxes as well as estimated state and federal income taxes. Then, when they file at tax time the next year, they either get a small refund or owe a small additional amount.

      The solar tax credit can wipe out the entire federal tax bill, up to the total amount that was taken for federal taxes during the year. Of course, the solar tax credit only affects federal taxes, and only after all other credits and deductions can be taken (for example, child tax credits reduce the tax burden first). Most people who make a decent wage will see a benefit from the solar tax credit.

      People who make very little money, such as retired people on social security or drawing from savings and retirement accounts, may not owe enough federal income tax to make the solar tax credit worthwhile. In those cases, it may be a better idea to choose a solar lease or power purchase agreement, where the solar company retains ownership of the system (and earns the tax benefits), and the homeowner can buy the solar energy for cheaper than their current rate.

  3. Avatar for Dick B Dick B says:

    Why isn’t/aren’t the panel makers using the newley patented in 2017 techeque for more efficency and a super reduction in cost to produce? Why is that???

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