The most important aspect of any purchase is price. In fact, most people looking into going solar are most concerned with how much it will cost. Nobody can give you an accurate estimate of how much your solar energy system will cost without an inspection of your roof and a shading study. But Green Convergence can help you discover whether or not you can save up to 26% when you purchase a solar energy system.
Congress extended the ITC in December 2020, which provides a 26% tax credit for systems installed between 2020 and 2022, and a 22% credit for systems installed in 2023. The 30% tax credit was available for systems installed before December 31, 2019. The credit expires in 2024 unless Congress extends it.
At Green Convergence, we like to make things simple, that’s why we recorded the most commonly asked questions about the ITC and have answered them below.
So, how exactly does the ITC work?*
Let’s start with an example. Say you pay $30,000 for your new solar energy system. This is, of course, the price after state and local rebates have been deducted. To cash in on the ITC, you would multiply that $30K by 26% ( or .26) and you would get $7,800. This is $7,800 you can now subtract from your federal taxes and put back into your pocket at the end of the year (2).
*Before reading on, please note that these are general facts about the ITC and shouldn’t be used as a substitute for personalized guidance from a trusted professional tax advisor. We pride ourselves on transparency and we want to give you as many facts as possible before you make a decision about solar but there are some services that only a third party can accurately provide.
Does everyone who goes solar qualify for the ITC?
As stated by the Office of Energy Efficiency & Renewable Energy, you might be eligible if you meet the following criteria:
- Your solar PV system was installed between January 1, 2006, and December 31, 2023.
- The solar PV system is located at your primary or secondary residence in the United States, or for an off-site community solar project, if the electricity generated is credited against, and does not exceed, your home’s electricity consumption. The IRS has permitted a taxpayer to claim a section 25D tax credit for purchase of a portion of a community solar project.
- You own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing nor are in an arrangement to purchase electricity generated by a system you do not own).
- The solar PV system is new or being used for the first time. The credit can only be claimed on the “original installation” of the solar equipment.
When do you get your rebate back?
Even though the ITC can reduce your taxes by up to 26% of the price of your solar energy system, it is not an immediate discount. You must first pay—whether it be with cash, a lease, or another financing option—for your solar energy system and then you can claim the Investment Tax Credit during tax season (3). The IRS form you will need for a residential solar rebate is 5695. You can find a current version of this form at IRS.gov (1).
So, if you are investigating solar for your home, check your tax liability, go solar and save with the ITC before it expires.
Sources:
http://blog.energysage.com/investment-tax-credit-rooftop-solar-happens-dont-enough-tax-liability/
http://www.bakerelectricsolar.com/blog/solar-investment-tax-credit-what-you-need-to-know/
http://pureenergies.com/us/solar-financing/federal-solar-tax-credit/
