The Solar Tax Credit
When you go solar, you have the opportunity to claim the 30% investment tax credit, also known as the federal tax credit!
What is the solar tax credit?
The solar investment tax credit was enacted in 2006 by the federal government to incentivize homeowners to go solar. They did this for environmental purposes. With that, sometimes the total cost of a solar system can be a bit pricey so the ITC lowers it by 26%! Congress has extended the duration of the credit and how much it is for multiple times, with the latest extension being in April 2021 for another 2 years.The tax credit allows homeowners to deduct 26% of the total cost of their solar system. There is no limit on the size of your tax credit. Along with that, there is no income limit on the ITC so taxpayers of all income levels are eligible to claim it.
How the solar tax credit works
The tax credit comes from the money you pay in federal taxes. It is tax money you were never going to see again before but, now since you are going solar, the federal government is giving it back to you. You must pay federal taxes in order to be able to claim the tax credit. If you do not have enough taxable income to claim your full tax credit year 1, it rolls over to the next 20 years and you are able to refile for the remaining amount until it is completely fulfilled. Think of it as a credit from Uncle Sam!This is done with the 5695 tax form.https://www.irs.gov/pub/irs-pdf/f5695.pdf
When you receive your tax credit, you have the option to apply it to your solar system to keep the price down or put it in your pocket!
How do I know if I am eligible to claim the solar tax credit?
●You own your solar system, as in you bought it outright or financed it with a loan. You did not sign a lease or PPA.
●You pay federal taxes.
●Your name is on the title of the home that the solar system is installed on.
●Your solar system has been installed between January 1, 2006 and December 31, 2023.
●You are the homeowner who is getting or got the system installed. You cannot claim the tax credit on a solar system that was already installed when you bought the home.
Other incentivesIn addition to the ITC, be sure to check out what incentives your state offers! These incentives include state tax credits, tax deductions, rebates, renewable energy certificates, performance incentives, buy back programs, etc