Without question, the federal solar tax credit is the single most lucrative financial incentive available for making the switch to photovoltaic power. It’s like getting an automatic 30 percent reduction in the price of a solar energy system installation — and the credit has no maximum dollar limit.
Tax time is rapidly approaching. If you put your residential solar energy system into operation last year, you can claim the solar investment tax credit (ITC) on your federal income taxes this spring by following the simple steps below.
Calculate the Amount of Your Tax Credit
The IRS requires that you calculate your federal solar investment tax credit (ITC) on your net photovoltaic system costs.
What does that mean? You’ll need to subtract any state or local financial incentives you received from your total costs before you calculate the value of the 30 percent credit. The only exception to this rule is a state-level solar ITC — that amount does not need to be subtracted.
So let’s say your total photovoltaic equipment and installation costs were $21,000 and you received $3,000 in state and local solar rebates. Your net total would be $18,000, which means your federal ITC amount would be $5,400 — not $6,300. Put down the wrong amount, and you can look forward to Uncle Sam sending you a tax bill.
Complete the Federal Solar Tax Credit Paperwork
To claim the solar ITC on this year’s federal income taxes, you’ll need to complete and send in the IRS Residential Energy Credits paperwork, or form 5695.
Most of the form is relatively simple to understand, and the IRS provides instructions to help you complete the ITC paperwork. Be careful when you use the calculation worksheets, however, as some of the terminology and guidelines can be a little confusing.
Getting Help with the Federal Solar Tax Credit
With residential PV system installations by Intermountain Wind & Solar, claiming the ITC is easy. We give every customer a binder with all the documents and information you need to complete the solar tax paperwork.
But we all know that the IRS isn’t very forgiving of mistakes. Make a simple, honest error, and they might not think you qualify for the full 30 percent credit. So even if you usually do your own federal income taxes, you might want to consult with an accountant or tax professional this year.
However, if you’d just like help with your federal solar ITC forms, our professional team can give you a hand. We’re not experts on taxes, but we’re familiar with these tax forms. We can also answer your questions about claiming state and local financial incentives.
For more information on how to claim the lucrative federal solar tax credit on your residential PV system installation, contact Intermountain Wind & Solar today.