- 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.
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