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The U.S has been grappling with the idea of making renewable energy the primary source of power for homes and industries. Solar energy is by far one of the most popular in the market today. As an incentive to ensure that as many homeowners as possible adopt the use of solar energy, the federal government came up with the Energy Policy Act of 2005 which first introduced the solar tax credit.
The federal solar tax credit allows you to deduct up to 30% of the cost of installing solar energy systems in homes and industries in the U.S. There is no cap to the value of the system installed, and this deduction applies to both residential and commercial solar system installations.
Originally established by the EPA in 2005, the solar tax credit was supposed to last until the end of 2007. However, due to its vast popularity, Congress has been extending that expiration date for over a decade now. It’s mostly because the solar tax credit has proven to be a highly effective incentive supporting the transition of the country’s economy into the renewable energy era.
Today, the solar tax credit is still available to both home and business owners. Here are some of the details:
The benefit of the solar tax credit for a taxpayer can essentially be boiled down to the benefits of installing a solar system in your own home or your business. The very first advantage is the fact that you get to claim 30% of the installation costs with no cap to how much your system costs.
For example, if you got a system that costs $10,000 you can claim 30% of that and have a tax credit of $3,000. Should your neighbor install a solar system worth $100,000, they get to claim $30,000.
The solar tax credit also has the following advantages:
Thanks to the solar tax credit, you start saving money from day one. Even the fees that go into consultations with a professional solar energy expert count as part of the installation costs.
If you want to install a solar system, you can qualify for 30% thanks to the federal tax credit. However, to do so, you must meet a few requirements during the tax year:
It’s understandable that you might want to lease your solar panels to save money. The problem with this is that the leasing company is the one that qualifies for the 30% tax credit, not you. You can, however, buy your own solar panels by taking out a loan and enjoy the 30% tax credit yourself.
Assuming you qualify for the solar tax credit, here are some of the things that you can claim when filing your tax returns:
You can do the installation yourself if you have the technical know-how but you can’t claim your own labor for installing solar panels as part of the tax credit on your return. When filing your tax returns:
Once that’s all done, you will have effectively filed for the 30% solar tax credit. You can consult your tax preparer to ensure that everything is in order.