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 30% when you purchase a solar energy system.
This great deal is made possible with the help of the Investment Tax Credit (ITC). The ITC is a generous tax credit granted by the federal government in 2006 to incentivize American citizens and businesses alike to install solar energy systems. And it’s worked wonders. The amount of active US solar energy systems is 1,600% greater than in 2006 (1). Numbers like that prove the program is capable of saving a potential SunPower by Green Convergence customer a lot of money. But, the mechanics of the incentive still remain foggy.
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 30% ( or .30) and you would get $9,000. This is $9,000 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?
Sadly, no. You must first investigate your tax liability. You only qualify for ITC perks if you have a “sufficient tax liability”, meaning “you must owe at least as much money in taxes as the amount of your credit” (1). If you meet those requirements, you only benefit from ITC if your solar energy system is purchased and activated by December 31st, 2016 (1).
What’s up with that Dec 31st, 2016 deadline?
It’s really all up to Congress. The ITC was passed in 2006 with an expiration date of 10 years. Without congressional intervention, residential solar owners will no longer be able to cash in on this great deal after 2016. So if you want in on the ITC, it is a safer bet to go solar sooner than later.
When do you get your rebate back?
Even though the ITC can reduce your taxes by up to 30% 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.