Federal Solar Tax Credit
What Is The Federal Solar Investment Tax Credit?
Solar energy has many benefits. It helps to protect our planet by reducing greenhouse gas emissions that contribute to climate change. Unlike natural gas or oil, solar power is a clean and renewable resource. Solar power helps to reverse some of the negative impacts associated with energy production, such as air and water pollution and solid waste disposal.
The United States government has recognized that solar energy plays a significant role in reducing greenhouse gasses and slowing climate change. To encourage more Americans to use solar power, the federal government subsidizes the purchase and installation of solar power generating systems by offering a federal solar tax credit to residential homeowners and commercial businesses. In addition to the tax credit, the government also reduces the payback time period for solar power investments.
Here are the main points of the solar investment tax credit (ITC):
- You can deduct 30% of the cost of installing a solar power system from your federal income taxes. After the year 2033, the deduction drops to 26%.
- The tax credit applies to the total cost of the solar system, including labor and equipment.
- The tax credit also applies to solar batteries, including standalone backup batteries.
- To claim the deduction in a particular year, your system must have been installed during that tax year and generate electricity for a home located in the U.S.
- If the entire tax credit is not used during the first year, the remainder of your credit can be rolled over to the next year.
Who Is Eligible For The Solar Investment Tax Credit?
You must meet all the following criteria to be eligible:
- Your solar system was placed into service after January 1, 2022.
- You own the solar system by purchasing it via cash or solar financing. Solar leasing or solar purchase agreements do not qualify for the tax credit. *
- Your system is new, or it is being used for the first time. The tax credit can only be claimed on the “original installation” of the solar equipment.
* NOTE: A solar loan is used toward the purchase of a solar power system for your home. Solar loan financing allows you to avoid the steep payments upfront while also giving you immediate ownership of your system. Like a regular loan, it is paid off monthly with an applied interest rate. However, since you are considered the owner of the system, you are entitled to the benefits such as tax credits and rebates.
* A solar loan is a loan that is used towards the purchase of a solar power system for your home. Solar loan financing allows you to avoid the steep payments upfront while also giving you immediate ownership of your system. Like a regular loan, it is paid off in monthly payments with an applied interest rate. However, since you are considered the owner of the system, you are entitled to the benefits such as tax credits and rebates.
LET’S SHINE THE LIGHT ON SIX IMPORTANT TAX CREDIT DETAILS
- Not every solar panel system is eligible for the tax credit. Please consult a tax professional to determine if your system is eligible for the credit.
- If you do not owe federal income tax for year in question, then you will not be able to benefit from the credit. Those who are on a fixed income, retirees and individuals who worked for less than a full year, may not owe enough taxes to qualify for the credit.
- If the tax credit exceeds your tax liability, you will not get a refund. This is a non-refundable credit; you will not get a refund for the amount of the credit that exceeds your liability. However, you can carry over the unused amount of the credit into the following year.
- The credit can be used against the alternative minimum tax as well as the traditional federal income tax.
- To claim your tax credit, you must file Form 5695 with your tax return in addition to Form 1040.
- The Federal Solar Tax Credit was recently extended to 2032. In 2033, the amount of the credit will be reduced to 26%.
GOING SOLAR IS EASY WHEN YOU WORK WITH SUNBURST SOLAR
The entire team at Sunburst Solar is dedicated to helping Americans go solar. Our goal is to spread the benefits of clean, renewable and affordable solar power to you, your family, your home and the world.
Have you been thinking about going solar? Take advantage of the solar investment tax credit and start your project now! Contact us today for a customized quote.
Saving the planet
While saving money is a pretty good reason for going solar, we want to remind you of the positive effects that a Sunburst Solar system has on the earth. We have helped thousands of homeowners like you save the planet by using clean, renewable solar energy. We estimate that our customers’ contributions over the next 20 years will have impacts equivalent to:
PLANTING 498,000 TREES
consuming 395,400 Gal. Of gas
Reducing 8,421,560 Miles of driving