Francisco CastroApril 2, 20193420
If you haven’t done your taxes yet, your date with Uncle Sam is right around the corner (April 15) and many will be looking for ways to help them keep as much of their hard-earned money from last year as possible.
Apart from reducing your carbon footprint and helping the environment, the installation of solar panels in your home can help you reduce the amount of money you owe to the government.
One of the benefits of a home solar powered system is that it allows you to take advantage of the solar tax credit.
This credit is a way the Environmental Protection Agency and the Department of Energy use to try to encourage Americans to use solar power, “green” energy which doesn’t pollute and reduces our use of coal and other fossil fuels.
Solar Tax Credit
Not to be confused with a deduction, where you deduce the amount from taxable income, a tax credit is an amount of money that taxpayers can subtract from taxes owed to the government.
The Internal Revenue Service (IRS) allows you to take a 30% solar tax credit through 2019.
Say, for instance, the solar panel system installation in your home or property cost you $10,000. Then you can claim a $3,000 tax credit, which means you owe $3,000 less in taxes for that year.
Other than the cost of the solar powered system, there’s no limit to the dollar amount of the credit.
Even if you don’t owe any taxes in the year you installed the solar powered system, you can carry the credit over to the following tax year.
According to the Solar Energy Industries Association (SEIA), the solar tax credit (also known as the Investment Tax Credit (ITC) is “one of the most important federal policy mechanisms to support the deployment of solar energy in the United States.”
In fact, SEIA notes that the residential and commercial solar ITC has helped annual solar installation grow by over 1,600 percent since the credit was implemented in 2006.
The solar tax credit is also applicable to commercial properties.
Beware, you can only claim the credit if you own your own solar powered system, not if you lease it.
If you lease it, the company that owns the solar panel system gets to claim the credit instead of you.
Even if you received a solar panel rebate, you can still claim this tax credit. Just calculate the 30% of the cost to you after you received this rebate. For example, if your solar powered system cost $25,000 and you received a $5,000 rebate from your utility, your federal tax credit would be $6,000 (30% of the remaining $20,000 cost).
And if you decide to install new solar panels to your existing system, you can also claim the credit for any new costs.
How to claim the solar tax credit?
If you installed solar panels in your home or property by December 31, 2018, you can get this credit. Just make sure you have receipts for everything related to the renewable energy system, including:
The more receipts you have and the higher the cost of the solar panel installation, the higher will be your tax credit.
The solar tax credit also applies to a second residence as well.
To claim the credit, you must file IRS Form 5695 as part of your tax return; you calculate the credit on the form, and then include the result on your 1040. If you’re going to a tax pro, let him/her know about the solar installation project in your home, so you can take advantage of this credit.
Credit will expire
The solar tax credit won’t last and won’t remain the same forever.
It decreases annually until it disappears for residential customers in 2022. The commercial and utility credit will drop to a permanent 10 percent after that.
Here’s a breakdown of the credit:
So if you were weighing the pros and cons of solar energy, this is yet another incentive to help the planet and your pocket. But don’t delay, because the solar tax credit will expire in the next few years.
To check the price for the installation of a solar energy system in your home or property, check out https://www.hahasmart.com/price-checker
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