An example that helped us understand the NC Renewable Energy Property tax credit

Here are a few things to remember about the NC Renewable Energy Property tax credit.
  • You have to owe income taxes to NC to use the tax credits.
  • Up to 35% of your donation is eligible for the NC Renewable Energy Property tax credit.
  • You can apply tax credits up to half of the amount of tax you owe in that year.
  • You can spread your tax credits over five years.
  • There is a $10,500 tax credit limit per installation for each donor. You would have to give over $30,000 to this project to exceed that limit.  
  • Because the credit is per installation, you can also earn credits in the same year for renewable energy property you purchase for other places (your home, other nonprofits); just file a separate NC-478G (2013 version of the form) for each.  So go ahead with geothermal or solar for your own home, too.
Meet Marcus
In 2015, Marcus donated $1,000 for the Community UCC Solar Array Project to Community United Church of Christ.  (Thank you, Marcus!) Up to 35% of Marcus's donation is eligible for the tax credits.
35% of $1000 = $350

Marcus' NC income taxes in 2015
In 2015, Marcus calculates that he owes $300 in income taxes to North Carolina.  How much of the tax credits can he use in 2015?

The tax credit cannot exceed half of the tax he owes. 
1/2 of $300 = $150
He can use credits up to half of $300, which is $150.  

So in 2015, Marcus will pay North Carolina
$300 (tax owed) - $150 (tax credits) = $150 income taxes.
Marcus will send NC $150.

What about the remaining $200 of the $350 tax credit?  Marcus will carryover the credit to 2016.  

Marcus's NC income taxes in 2016
This year Marcus calculates that he owes $250 in NC income taxes.  Again, the tax credit cannot exceed half of the tax he owes.
1/2 of $250 = $125 
He can use credits up to half of $250, which is $125. 
 
So in 2016, Marcus will pay North Carolina
$250 (tax owed) - $125 (tax credits) = $125  income taxes.

Marcus still has some tax credit left to carryover to 2017.  How much?  
$350 (total tax credits) - $150 (the credit used in 2015) - $125 (the credit used in 2016) = $75 carryover to 2017.

Marcus's NC income taxes in 2017
Marcus calculates that his 2017 income taxes are $300. Again, the tax credit cannot exceed more than half of what he owes.
1/2 of $300 = $150
He can use credits up to half of $300, which is $150.  He had carried over $75 in credits.
Marcus will use up the remaining $75 of his tax credits.

So in 2017, Marcus will pay North Carolina 
$300 (tax owed) - $75 (remaining tax credits) = $225 income taxes.

How did Marcus do on his NC income taxes?
2015  income tax owed    $300          income tax paid  $150    tax credits used  $150
2016 income tax owed     $250          income tax paid  $125    tax credits used  $125
2017 income tax owed     $300          income tax paid  $225    tax credits used  $  75
                                       
Summary, over three years, Marcus owed $850 in NC income taxes, but paid only $500.  His savings were the $350 NC Renewable Energy Property tax credits.  Effectively, Marcus donated $1000, and got $350 back.

Consult your tax advisor on whether these tax benefits are relevant for you.  

Information about the NC tax credits:  Guidelines for Determining The Tax Credit for Investing in Renewable Energy Property