Written by Davey Newlove
Installing solar panels on your home not only has environmental benefits, but also financial benefits. Installing solar can be a financially sound investment, even more so when you take advantage of the federal solar tax credit. Increasing utility rates across the country may play a factor in the length of your return on investment (ROI). The federal solar tax credit can help shorten the length of your ROI helping you start earning money on your installation even faster. The federal solar tax credit can significantly reduce the net cost of your solar panel installation.
What Is A Tax Credit?
To be clear, a tax credit is not a rebate check that you receive in the mail. A tax credit is a dollar-for-dollar reduction in the amount of taxes that you would owe to the federal government. For example, if you owe $1,000 on your taxes but are eligible for a $1,000 tax credit, your net liability drops to zero. This makes a tax credit more valuable to the tax payer than a write-off. Speak more with your tax expert to see if you qualify for tax credits.
What Is the Federal Solar Tax Credit?
Right now there is a federal solar tax credit. This tax credit allows you to deduct 30% of the overall cost of your solar installation on your federal taxes. This tax credit is good until 2033, at which point it will drop down to 26%. This number will drop to 22% in 2034 and will disappear in 2035 unless Congress decides to renew it. This tax credit applies to both residential and commercial solar installations, and there is no cap on its value. If you are installing a battery system with your solar, the tax credit applies to that as well.
What Expenses Qualify?
The credit is applied to the total cost of your solar energy system. This includes the solar panels, inverters and other installation components, permitting and labor. For example, if the overall cost of your solar installation is $50,000 and there is a 30% tax credit, then you will see a $15,000 credit on your taxes.
$50,000 x 30% = $15,000 through 2032
$50,000 x 26% = $13,000 in 2033
$50,000 x 22% = $11,000 in 2034
Am I Eligible?
How will you know if you are able to take advantage of this great financial benefit of going solar? If your solar energy system was installed between January 1, 2022 and December 31, 2034 and is located at your property in the United States, you are eligible. If you moved into a property that already had solar installed on it, unfortunately you are not eligible. The credit can only be claimed on the original installation of the solar equipment. If you are adding additional panels and/or are adding a battery backup to an already existing system, the new equipment installed will qualify for the solar tax credit.
How Can I Apply the Credit?
People who purchase solar energy systems can apply the tax credit when filing taxes. If you install solar on your property in 2023 you can reduce your 2023 tax liability which will allow you to see the benefit when filing taxes in 2024. If you employ the services of a tax preparer, let them know about your solar installation so that they can help you take advantage of this great financial benefit. You will also need to provide them your invoice as evidence of your solar installation.
How Can JsunPV Help?
Here at JsunPV, we assist homeowners through the complications of the tax credit that come with purchasing a solar energy system. This includes guiding customers through which forms to fill out, what taxable income you are liable for and what kinds of deductions you should be able to qualify for. We want to make sure that you maximize the full financial benefits of installing solar on your property.
There are many benefits to going solar. With the federal tax credit, the financial benefit is very strong. Contact JsunPV today to go solar!