What is The Solar Tax Credit Incentive?

Solar Incentives

Disclaimer: We’re Solar Advisors, not Tax Accountants.

There are many reasons why homeowners like you are considering going solar, and improving the environment and cutting your house energy costs are very good reasons to do it.

When you purchase and install a solar power system, the federal government rewards you with a tax credit for investing in solar energy.
Currently this Federal Solar Government Tax incentive is at 26% (as of 12/01/2019).
Homeowners that purchased  and installed a Solar panels system can claim it (while still available) with the IRS to subsidize their Solar Panels purchase.

What is The Solar Tax Credit incentive?

The solar Investment Tax Credit (ITC) is one of the most important federal policy mechanisms to support and incentivize the growth of solar energy in the United States.

Since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 10,000%!

The Energy Policy Act of 2005 created a 30 percent ITC for residential and commercial solar energy systems that applied to projects placed in service between January 1, 2006 and December 31, 2007.

In 2006, the Tax Relief and Health Care Act  extended these credits through December 31, 2008.

In 2008, the Emergency Economic Stabilization Act  included an eight-year extension of the
residential and commercial ITC, eliminated the monetary cap for residential solar electric installations and permitted utilities and companies paying the alternative minimum tax (AMT) to qualify for the credit.

In 2015, the Omnibus Appropriations Act  included a multi-year extension of the residential and commercial ITC described above and changed the previous “placed-in-service” standard for qualification for the credit to a “commence construction” standard for projects completed
by the end of 2023.

How The solar Investment Tax Credit (ITC) works?

When you (The Homeowner) purchase and install a solar system in your home, a big percentage (26% as of 12/03/2019) of your total project costs (including equipment, permitting and installation) can be claimed as a credit on your federal tax return.

For that, you need file IRS Form 5695 to claim the residential energy credit.


ITC federal Solar Tax incentive

The Solar Tax credit investment is decreasing over time following this timeline:

2016 – 2019: The tax credit remains at 30 percent of the cost of the system.
2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the
cost of the system from their taxes. There is no federal credit for residential solar energy systems.



Solar incentives available



The Solar Investment Tax Credit or ITC, it’s different than a refund, because you have to owe taxes to claim the incentive.

But since most people owe taxes, most people end up being eligible.

A tax credit is a dollar-for-dollar reduction of the income tax you owe. $1 credit = $1 less you pay in taxes.
You are only allowed to claim the credit if you own your Solar panels system.

For that, you need file IRS Form 5695 to claim the residential energy credit.

If another company leases you the system, they still own the equipment, so they get to claim the incentives.

 

Solarman

by Solarman

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