If you are still debating whether or not you should move forward with solar energy, here are a few more reasons to throw in. There are several different types of tax benefits and other incentives available to help you get started and save even more money. One of these benefits is the Federal Solar Tax Credit.
What is the Federal Solar Tax Credit?
Basically, it is an incentive. This means if you buy and install a solar energy system, the federal government will give you a tax credit for investing in solar energy. Right now, that is 26%. Next year it will be slightly less and it may be gone completely in the future.
This is shown on your income tax. That 26% is for your total project cost, which includes equipment, permitting and installation. It can be claimed as a credit on your federal tax return.
This tax credit works out to be a dollar-for-dollar reduction of the income tax you owe. So, $1 credit = $1 less you pay in taxes. Please note that a credit is different than a refund, because you have to owe taxes to claim the incentive. As most people owe taxes, most people end up being eligible for the Federal Solar Tax Credit.
It’s also important to point out you are not eligible for this credit if you only lease your solar power system. Leasing still entitles you to the saving from using solar energy, but not the tax credit.
How Do I Claim My Tax Credit?
Make sure you keep all your receipts, as you are entitled to claim on almost all aspects of your solar energy installation. The more you have spent, the bigger your tax credit will be.
Next, you need IRS Form 5695 to claim the residential energy credit. You can add up all the renewable credits on this form and then simply add this information to your typical form 1040.
It’s that easy. If you file your own income taxes, there will be a guide to follow and complete. Online filing will assist you through it all.
What can I Claim?
There is a lot you can claim, in fact, almost every step of the installation can be claimed for your federal tax credit.
Include things like:
- All Solar equipment
- Wiring, screws, bolts, nails, etc
- Tools you bought or rented
- Solar consulting fees
- Engineer fees
- Professional installer fees
- Permitting fees
- Permitting service costs
- Freight shipping costs
- Electrician fees
- Any other equipment purchased or rented (scaffolding or a man-lift, for example)
Get Your Credit
You can claim the credit in the same year you complete the installation, so you can still take advantage of the 2020 credit. The tax credit has a big bearing on the return on investment you see from going solar.
The grid-tie systems will pay for themselves either way, but claiming the credit allows you to realize more immediate savings. You really should take advantage of this credit while it is here, as it will make a big difference in your overall cost of installation.
There has never been a better time than the present to install your solar power system. Get those panels installed and start saving money today. You need to act fast to take advantage of the 2020 tax credits, as it will be lower next year and perhaps a distant memory after that.
Moving into solar energy is a smart move, for lifetime savings and for the beneficial impact on the environment. If you’re ready to get into solar, contact us today!