Renewable energy sources are on the rise. From solar to wind, the options for powering your home and office are increasing and becoming more affordable.
Solar energy is efficient, better for the environment and offers significant long-term savings. In some cases, users actually see a negative energy bill. However, there is an upfront cost that makes many homeowners hesitate to make the switch.
If you’re considering solar, an energy tax credit might just be enough to tip the scales in solar’s favor. Here’s what you need to know about this solar energy benefit.
The energy tax credit was created in 2015 by the federal government and lets taxpayers claim a credit of up to thirty percent for qualified expenses related to converting to solar power.
There is no cap on the credit, and it can be used for both residential and commercial applications.
Created for the sole effect of encouraging Americans to make the switch to alternative energy systems, the energy tax credit, also called the Investment Tax Credit, has been responsible for a 54% yearly growth in solar power since its inception.
You’ll need IRS Form 5695 to file for your credit. There are a few stipulations you’ll need to be aware of.
This is your last year to claim the full credit for your solar installation. After 2019, the claimable percentage decreases according to a set schedule.
For a system to qualify, it must have been installed between January 1, 2006 and December 31, 2021.
There is no maximum allowable amount, and no stipulations on the kind of solar system installed, meaning 100% of your quoted installation costs will generally be included.
However, this is a tax credit only; you won’t receive money back. If you don’t have enough tax liability, you won’t be able to use the full amount.
However, the balance can be rolled forward onto the next year’s taxes.
It’s important to note the tax credit only applies to purchased systems. You will not be able to claim leased equipment.
Working with a solar company will help ensure you get the full amount available credited to you. Even the fees from consultations with solar professionals count toward your credit!
Many companies also offer financing options, meaning less out of pocket up front.
Remember, this is the last year you can take advantage of the full energy tax credit, making it the perfect time to finally make the switch to renewable energy. A little money up front can equal big savings down the road, but the federal solar tax credit can add a little money back into your pocket this tax year!
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