So, you’re thinking about going solar and you want to know what the federal solar tax credit actually means for you. With so much information out there it can be hard to understand what is actually going on, and often solar tax breaks can seem too good to be true!
Rest assured, they do exist. At the moment, there’s a federal tax credit available for those who install solar energy. Find out more about who gets it, why it exists and how to get it.
What is the Federal Solar Tax Credit?
At the time of writing, the federal solar tax credit sits at 26 percent of the cost of installing solar energy systems from your taxes. As such, it’s a great time to invest in solar energy that can save you a lot of money in the long run.
Essentially, solar tax credits offer a tax incentive to those who use solar-powered energy. This federal investment tax credit (ITC) tax incentive will drop to 22 percent at the end of 2020, so it’s important that people who want to capitalize on it get in fast.
Why Does the Federal Solar Tax Credit Exist?
The ITC is in place to encourage the public to use renewable energy and install solar energy systems. It originally came about as part of the Energy Policy Act of 2005 and has had its expiration date revised several times so that people may continue to use renewable energy.
It helps individuals who would otherwise avoid solar energy get on the purchasing ladder by offering them a tax break and making the initial start-up costs of solar more achievable.
Who Benefits from the Tax Credit?
The federal solar tax credit is for anyone who owns their own solar energy systems. This applies to both residential and commercial properties, as long as you’re the owner. However, this means that if you rent your solar systems from a provider you will not be able to claim solar tax, but this is pretty much the only exception.
The good news is that, even if you don’t pay enough tax to claim the entire credit in one year, you can rollover the remaining credit for future years.
How Do You Claim Solar Tax Credits?
Claiming solar tax credits depends on whether you deal with your own taxes, or whether they go through an accountant. If you go through an accountant, they’ll be able to deal with it when they file your taxes as long as you let them know you’ve gone solar.
If you file your own taxes, you’ll need to complete IRS Form 5695 along with adding your solar energy credit to the normal Form 1040.
Conclusion
The ITC federal solar tax credit is a great opportunity to save on the upfront cost of solar installation. With its only exception applying to renters, it’s a viable option for both homeowners and commercial property owners who want to go solar and save on their utility bills.
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