What Is The Federal Solar Tax Credit?
- The Federal Solar Tax Credit, which originally started in 2005, has been expanded to last through 2022. This tax credit, also known as the "Investment Tax Credit," or "ITC," is a dollar-for-dollar reduction in the federal income tax you owe. So for every $1 you spend on your solar power system, you get 30% of that back in a tax credit.
- The 30% credit will only last only through 2019. In 2020, it drops down to 26% and down to 22% in 2021 and in 2022 there will no longer be a tax credit for residential systems. However, there will still be a 10% credit for commercial projects only.
Do I Qualify?
- In order to qualify for the ITC, 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 2023, 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 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 ITC savings, then you can still use those credits toward what you owe in the following year.