The idea of saving 30 percent on a new home solar panel system sounds too good to be true. It must be some kind of gimmick, right?
It is not a gimmick.
The federal solar investment tax credit (ITC) can cut your photovoltaic costs by a full 30 percent. As long as you own your home PV system and you pay federal taxes, you’re eligible for this lucrative financial incentive.
How Does the Federal Solar Tax Credit Work?
The federal solar tax credit reduces your income tax liability by an amount equal to 30 percent of your net photovoltaic costs.
To calculate your solar ITC, simply take your total equipment and installation charges and subtract any state or local financial incentives you receive — that’s your net cost. Take 30 percent of that number, and you’ll have your tax credit amount.
So let’s say you purchase a home solar panel system for $22,000. Then you receive a state rebate of $2,000. Your net photovoltaic costs would be $20,000, and your ITC would amount to $6,000 ($20,000 x .30 = $6,000).
What if You Don’t Owe Enough to Claim the Full Solar Tax Credit?
Now consider your tax liability. Let’s say you owe $7,500 in taxes next April. The $6,000 solar ITC from our example above would drastically lower that amount — you’d only have to pay $1,500.
But what if you don’t owe that much? What happens if your tax liability is only $5,000?
Don’t worry if you can’t claim the full solar ITC — the tax credit can be carried over. Using our example, you’d end up owing nothing this year, and the remaining $1,000 would be claimed on next year’s income taxes.
Want to Save Even More on a New Home Solar Panel System?
The federal solar tax credit gives you the biggest opportunity to save on your home PV installation — 30 percent off is hard to beat.
Even though the federal ITC is the largest financial incentive for switching to photovoltaic power, it isn’t the only one.
Many state and local tax credits, rebates and grants are available for home PV system owners. Claim everything you can, and you’ll save thousands more on your home solar array. Ask your photovoltaic installer to point you toward the financial incentives in your area. Or head to the U.S. Department of Energy’s Database of State Incentives for Renewables and Efficiency (DSIRE) website. Here, you can find a comprehensive list of all available offers, along with eligibility details and application information.
The photovoltaic contractors at Intermountain Wind & Solar aren’t experts on taxes, so if you need tax advice, we recommend talking with an accountant or tax professional. However, if you only have concerns about filling out your federal solar tax credit paperwork, we can help.
We can also let you know about all of the financial incentives available to home PV system owners in the Intermountain West. To find out more about saving money on your home solar panel system, contact us today.