Are you looking to give solar energy a try?
More Americans are becoming keen on installing solar panels. However, a lot of homeowners still find the upfront costs high.
With the federal solar tax credit, you can reduce your expenses and maximize the value of solar energy systems.
Continue reading to learn how the ITC works in practice and how to apply for one.
Federal Solar Tax Credit: How Does it Work?
The federal investment tax credit (ITC) allows people to claim a notable percentage of the cost of their solar photovoltaic system. The ITC started in 2005 and received its latest extension in 2020.
Homeowners qualified for the ITC will enjoy a 26% tax credit reward from the government. If you spent $10,000 on your solar energy system, the government deducts $2,600 on your federal tax payment the following year.
The 26% deduction applies to your expenses on the equipment. It includes the labor costs for onsite preparations, assembly, and installation. You also get credit for the inspection, permits, and developer fees.
The rate of the tax credit is now lower compared to previous years. Homeowners who installed solar panels between 2017 and 2019 received a 30% tax credit. Switching to solar between 2020 and 2022 means getting the current rate.
Sometimes, you don’t have enough tax liability to claim for the year. When it happens, roll over the remaining credits the following year.
Regardless of the year, you can use the ITC savings to maximize your solar systems. You can spend on energy management software. It allows you to track the output of your solar panels.
Do you have another home improvement project in line? Fund it using your ITC savings.
Who Is Eligible for the Tax Credit?
To qualify for a federal solar tax credit, install the solar photovoltaic (PV) system any time between January 1, 2006, and December 31, 2023. You must own the solar energy system.
You can qualify even when you buy the solar PV system from a local solar panel company through financing. Homeowners leasing their systems do not qualify.
The solar panel installation is only exclusive to the United States. The house can either be your primary or secondary home. For Columbus residents, Blue Raven Solar can help maximize your solar panel savings.
Applying for a Tax Credit
Fill out the IRS Form 5695 to apply for the ITC. Secure all your expense receipts showing your expenses on the solar system installation.
Secure your IRS Form 1040 and include your renewable energy credit information.
Discover Ways to Save More Money Now
The federal solar tax credit allows you to reduce the financial impact of solar panels. It eases your transition to clean and renewable energy.
However, applying for tax credits and finding the best solar panel company are not the only ways to increase your savings. Learn about other financial strategies to get the most out of your investments.
Did this guide help? Consider reading our other posts today.