Federal Solar Tax Credit: Everything You Need to Know
Federal Solar Tax Credit: Everything You Need to Know
It’s true, going solar will save you a substantial amount of money on your energy costs over time. Homeowners can save up to $50,000 in energy costs by switching to solar. But now with the federal solar tax credit, you can save even more.
With this solar panel tax credit, you can be refunded thousands of dollars by the Government, making solar energy even more affordable than it already is.
But one thing that isn't too well known is by the end of 2019, the full solar tax credit will start to diminish substantially.
If you've been on the fence about going solar, now's the time.
Thinking that all these solar energy system savings are too good to be true? Think again!
Let's run through everything you need to know about the solar panel tax credit. We’ll tell you what it is, how much money you can save, how to claim this refund, and also when it ends.
Federal Solar Tax Credit: What Is It?
The Federal solar tax credit, also commonly referred to as the solar ITC (investment tax credit), is a result of the Government passing the Energy Policy act of 2005.
This energy policy has gone through several extensions by congress, with the latest being a spending bill that was passed in 2015.
The solar tax credit makes it possible for homeowners to get money back through their taxes when they move to solar. That’s right, this government credit is a dollar-for-dollar credit that you are able to use to reduce the amount of taxes you owe to the federal government.
It’s important to note this tax credit is in fact a credit. It is not a subsidy or a refund, and it is super easy to claim.
But first, let’s take a look at the savings available, as well as when the tax credit expires.
How Much Money Can You Get Back From The Solar Panel Tax Credit?
This Federal solar tax credit lets you subtract 30% of the solar installation cost from your federal taxes. This means you’ll owe less on your federal taxes.
So let’s break it down. Let’s say you move to solar in 2018 or 2019 and 30% of your solar panel installation comes to be $5,000. You can take this amount and subtract it from the amount you owe in federal taxes to reduce the total amount you owe.
Continuing on with the above example, let’s say you also owe $6,000 in federal taxes. By applying the solar tax credit, the new amount you would owe is just $1,000.
But what if your solar panel tax credit ends up being more than the amount you owe in federal taxes?
If this happens, you can take the surplus amount and roll it over into subsequent years and pay less on federal taxes.
Full Solar Panel Tax Credit End In 2019
This solar panel tax credit has allowed for many homeowners to save thousands. However, 2019 is the last year you will be able to receive the full solar panel tax credit.
After 2019, the solar tax credit reduces each year until 2023, when homeowners will no longer receive energy tax credits. Here’s what it looks like for both residential and commercial solar energy systems:
2020 - For residential and commercial, you can deduct 26% of your solar installation from federal taxes.
2021 - For residential and commercial, you can deduct 22% of your solar installation from federal taxes.
2022 and subsequent years - For commercial only, you can deduct 10% of your solar installation from federal
As you can see, homeowners after year 2021 will no longer be able to claim the solar energy tax credit for residential solar energy systems, and commercial owners will only be able to claim 10% of their installation cost.
One important note is that homeowners can claim the credit as soon as their solar energy system is complete. Their system needs to be operational by December 31, 2023.
How Can You Qualify for Solar ITC (Investment Tax Credit)?
So, how do you qualify for your solar tax credit?
The only requirement is that you own your solar energy system. The amount you’ll be able to claim from your installation cost will depend on the above dates, based on when you install your solar panels.
One thing to note, however, is that you must own the system. If you sign a lease or a power purchase agreement, you don’t own the system until it is paid off.
Is It Difficult to Claim the Federal Solar Tax Credit?
With so much in savings, you might be thinking, “You’ve got to hop through an infinite amount of hoops to cash in on thousands of dollars in credit, right?”
Wrong!
Claiming the energy tax credit is actually super easy.
If you are doing your own taxes, you’ll just need to fill out a simple 2-page IRS form (form 5695) called Residential Energy Credits.
If you don’t do your own taxes, just ask your tax professional do it for you, and send in the form with your taxes.
That’s it! It is really that simple.
Go Solar Today & Save Extra Before It’s Too Late!
Don’t wait any longer to make the change to clean energy. Take advantage of the federal solar tax credit and start saving money on your energy costs.
Want to quickly calculate the savings you’ll experience by changing to solar and get a FREE quote? Click here to calculate.
As a 5 star-reviewed company and with an A+ rating from the Better Business Bureau, TriSMART Solar is here to help you every step of the process, from the site assessment, 3D custom design, to the installation.
Check out what our customers have to say, and see previous jobs to get a full picture of what going solar can do for you by clicking here.
Have any other questions about the federal solar tax credit? Leave a comment below and we’ll answer it!