You’ve likely heard of the federal solar tax credit if you consider adding solar panels to your home or business.
The federal government offers a 30% tax credit for solar panels to help offset the cost of solar panel installation and purchase costs for residential homeowners across the U.S.
The solar tax credit was due to expire in 2023. However, the Inflation Reduction Act extended it recently as an incentive for green energy. It is still a valuable and relevant option for anyone who wants to go solar.
Here are the facts about the solar tax credit.
2022 SOLAR TAX CREDIT UPDATES
President Biden signed the Inflation Reduction Act 2022 into law on August 16, 2022. It is the most prominent climate change bill ever and contains a significant extension of the federal solar tax credit.
It invests $369 billion in energy security and climate change. Working families get tax credits to reduce their energy bills. Biden states that it offers rebates for people to purchase new, efficient appliances and tax credits for heat pumps and rooftop Solar.
The tax credit and rebate expansion will offer home and company owners more incentives to get solar. A tax credit is also available to those looking to buy a used electric vehicle (EV). Buyers would be eligible for a maximum of $7,500 if the EV were made in America.
WHAT IS THE SOLAR TAS CREDIT?
Here’s some history.
In 2005, the solar tax credit was created by legislators to make solar energy more affordable. It reduces taxes on U.S. homeowners who purchase or install solar power. The solar investment credit (ITC), extended by lawmakers through 2015, is now available to all. Congress then approved the federal spending bill for 2016 to 2019.
The extension of tax credit extended the 30% tax credit for solar panels. This applies to taxpayers who have completed installation and purchase before December 31, 2019.
Congress passed an extensive Omnibus Spending Package — $900 Million in Coronavirus Relief –, but it also included a solar credit extension. The new legislation set the residential solar credit at 26% in 2020-2022 and 22% in 2023.
The credit would have expired in 2024 without an extension via the Inflation Reduction Act. The Inflation Reduction Act extended credit to 30% until 2032, which was good. If Congress does not renew it, the credit will be reduced to 26% in 2033 or 22% in 2034.
You can easily switch to solar power with the federal solar ITC. It can be claimed when you file federal income taxes to cover your solar photovoltaic (PV), battery storage, and installation costs.
WHAT CAN THE SOLAR TAX INSIDER DO FOR YOU?
Many people view solar panels as a significant home improvement project. Most people decide to go solar without spending money and end up with significant long-term savings by reducing or eliminating their electricity bill.
The average home will save between $20,000 to $40,000 on its solar energy system’s entire lifetime.
These are the top financial reasons for going solar.
Even if your home or business doesn’t require as much power, your monthly utility consumption will decrease dramatically.
Solar owners can send their unutilized energy to the grid in exchange for credit on their monthly utility bills. Our five service areas (Texas, Colorado, Florida, Virginia and North Carolina) have Net metering with local utility companies.
Solar panels are more expensive than homes without them. If you ever sell your house, you will likely see a greater property value.
To make solar ownership more affordable, some states offer tax incentives.
Colorado and Texas provide a property tax exemption so homeowners won’t be subject to additional property taxes due to their home’s increased value because of solar panels.
Local rebates are available to reduce installation costs in addition to the federal tax credit. Austin Energy, for example, offers a Solar Rebate to help reduce the cost of solar power. In San Antonio, CPS Energy also offers this rebate. If you reside in Texas, you can read the complete list of Texas solar incentives and rebates.
Who is eligible for the ITC?
These criteria may qualify you for the solar ITC.
- Your PV system was installed sometime between January 1, 2006 and today. Or, you intend to do so by December 31, 2034.
- Your setup for PV is at a U.S. commercial or residential property.
- Your solar panel system must be new or used. Only original equipment installations are eligible for the solar tax credit
HOW DO I CLAIM SOLAR TAX CREDIT
The solar tax credit is available to anyone who purchases a solar energy system that belongs to their household or business. The credit can be claimed when you file your federal tax return.
Your accountant should know that you have installed solar panels within the last year. tax form 5695 is sufficient if you are filing your own taxes.
Is there an income limit for the SOLAR TAX credit?
There is no income limit to be eligible for the solar ITC if you are concerned about your income. You will need to have a large tax liability charge in order to claim your full credit.
CAN THE FEDERAL SOLAR TX CREDIT BE REMOVED?
Your remaining credits may be carried over to future years if you don’t have enough tax liability to claim all of your solar tax credit within one year.
IS THE SOLAR ENERGY TAX CREDIT REFUNDABLE
The ITC is an nonrefundable credit. The Internal Revenue Code provides that credit can be carried forward or retraced for one year.
If you have not had a tax liability in the past year but don’t now, you can still claim this credit. You can still claim the credit even if you don’t have one in this year, but you will at some point over the next 20.
FREEDOM SOLAR IS A INSTALLER YOU CAN TRUST
Solar panel installations are a large project. It is important to hire a trustworthy and reliable team. Freedom Solar can help you make the switch to solar easy and affordable, no matter if you are a homeowner or an office manager like Whole Foods or Office Depot.
We can help you if your thinking of going solar. Start your journey with our 7 steps to Solar process.