Taxes, they are a part of life like getting sick, bumping your shin or elbow on a hard surface, or any other things that will happen even if we don’t want them too! Yet today as we dive into yet another reason to go solar, we are gonna see how the already amazing solar investment can help us even in the realm of taxes!
Federal Solar Investment Tax Credit (ITC)
Since 2005 the government has encouraged the growth of the solar industry by implementing a tax incentive or credit to encourage homeowners to take the leap into making a solar investment! Tax incentives are a way the government can support the future success of growing industries in America which in turn stimulates the economy, amongst other motives for stimulating an industries growth. Since it’s implementation the credit has varied in amount yet it continues to live on even today!
The Federal Solar ITC was set to diminish to 26% in 2023 but thanks to Congress choosing to renew the incentive we can count on a 30% incentive for the next 10 years!
How does the Solar ITC Work?
The tax credit is exactly that, a credit. This works in the way of deducting an amount that corresponds as 30% of the total price of your system from the income taxes owed by an individual. This means if you bought a $90,000 solar system, you would owe $30,000 less in taxes. This one-time tax credit does roll over if the amount of the credit is more than you owe in taxes. It is important to note that this is not a rebate or a deduction, but a credit applied towards taxes owed.
To qualify for this credit you need to have purchased a solar system within the timeframe in which the credit is available, so from 2022 – 2033 in our present case. It is important to note that to qualify it has to be a system owned by the person not leased, and it must be a new system. Systems that are financed are eligible as the buyer is legally bound to pay the full amount for the system.
How to receive the Solar ITC
As the Solar ITC is dealing with taxes, it will be a part of your income tax filing. It is important to note that many companies will recommend consulting a tax expert when filing to ensure you properly file for the ITC. Also you should receive from the solar company all required documentation, but you can request it to make sure. You will need to fill out IRS Form 5695, making sure to input all correct and needed information and include it in your filing.
It is also prudent to check with a tax professional and the Database of State Incentives for Renewables & Efficiency for any other incentive, rebates, credits, ect. that may be offered in your specific state and region that would allow you to further benefit from your solar purchase!