Thanks to falling prices and the federal solar tax credit, going solar has never been cheaper.
This 30 percent income tax credit is available to both residential and business customers. This credit makes the cost of installing a new photovoltaic energy system truly affordable for almost everyone.
How do you claim the solar investment tax credit (ITC) for your new solar panel array?
The Solar Tax Credit Is for the Photovoltaic System Owner Only!
Only the individual who actually owns the photovoltaic system is eligible for the federal solar tax credit. Leasing or making a power purchase agreement (PPA) doesn’t count, because since you aren’t paying for the equipment yourself, the IRS doesn’t consider you to be the system owner.
When considering solar financing, explore all of your options to determine the best strategy.
You may be able to qualify for a home equity line of credit or other bank loan, or you might be able to take advantage of new types of solar loans. Considering all possible purchase methods and their tax implications will provide you with the best return on your investment.
The Tax Credit Is Calculated on the Net System Price
The IRS doesn’t allow double-dipping when it comes to the federal solar ITC and other rebates or incentives. In other words, you must claim the credit for the net price of your photovoltaic system and its installation.
Determine your net cost by deducting the total you received for other financial incentives from the actual cost of your equipment and labor. These incentives may include any state and local rebates as well as utility and installer promotions.
The Solar Tax Credit Only Applies if You Pay Federal Taxes
The solar ITC is directly tied to your federal income taxes, in that it reduces the amount of your tax bill for the year. Therefore, you only will be able to claim the credit if you owe the IRS money on your income tax return.
For example, let’s say you paid $20,000 for your photovoltaic system and installation. That qualifies you for a $6,000 federal solar ITC. So if you owe $7,500 in taxes next year, you’ll end up paying just $1,500 after the credit is applied.
But what if you don’t owe that much?
Let’s say you only owe Uncle Sam $2,000 in taxes next year. The credit will cover that amount, and then the remaining $4,000 will roll over to be claimed on next year’s taxes. Currently, the federal solar ITC can be carried forward through at least 2021 but with a phase-out plan through 2023.
Of course, you should always consult with a tax professional for advice on how to claim your credit. But if you just need help filling out your federal solar tax credit paperwork, the experts at Intermountain Wind & Solar can assist you.
In fact, we can explain all of your options for financing, rebates and incentives. Our goal is to make solar energy affordable for everyone, and our bulk purchasing power helps reduce your initial costs even more.
Contact us today for a complimentary solar estimate, and let us show you how affordable photovoltaic power can be with the federal solar tax credit.