What Is The Federal Solar Tax Credit?
- Residential Renewable Energy Tax Credit applies to the following technologies: Solar Water Heat, Solar Photovoltaics, Biomass, Geothermal Heat Pumps, Wind (Small), Fuel Cells using Renewable Fuels
- There is also a similar Tax Credit applicable for corporate infrastructure improvement called: Business Energy Investment Tax Credit (ITC) and this applies to similar technology.
- Currently the credit amount is as follows:
30% for systems placed in service by 12/31/2019 (Expired)
26% for systems placed in service after 12/31/2019 and before 01/01/2023
22% for systems placed in service after 12/31/2022 and before 01/01/2024 - The Tax Credit can apply to the following resistances: Existing homes and new construction; principal residences and second homes qualify. Rentals do not qualify. In most applications RV and Marine qualify as either a principal residence or second home, so the tax credit can also apply to solar improvement on these as well.
- The Federal Solar Tax Credit, which originally started in 2005, has been expanded to last through 2024. This tax credit, also known as the "Investment Tax Credit," or " Renewable Energy Tax Credit" is a dollar-for-dollar reduction in the federal income tax. So, for every $1 you spend on your solar power system, you get a respectable percentage of that back in a tax credit.
Do I Qualify?
- In order to qualify for the Renewable Energy Tax Credit, you must own your solar power system. If you lease your system, the owner of the system gets the tax credit, not you. You must own the property you install your system on and you must live in it for part of the year in order to claim your credit. As long as your system is operational by 2024, you can now claim your tax credit as soon as the construction of the system is complete.
How Do I Claim My Credit?
- Make sure you keep receipts for every expense you acquire while building your solar system. The expenses you can claim may include more than you think. Along with the equipment costs, you can also claim the cost of shipping, any tools you purchased to install your system, the cost of an electrician or installer, any other equipment you purchased or rented to install your system, and any permitting costs or fees.
- You will need to use IRS Form 5695: Residential Energy Credits to claim the residential energy tax credit. You will then add this to your 1040 form.
You can carry credits into the following year. This means that if your federal tax liability is lower than your Renewable Energy Tax Credit savings, then you can still use those credits toward what you owe in the following year.
