Understanding the Federal Solar Tax Credit

Are you considering installing solar panels on your home? Great news! The federal solar tax credit can make your solar investment a lot more affordable. Here’s a friendly guide to help you understand how this credit works and how Truth In Solar can assist you in making the most of it.

What is a Tax Credit?

A tax credit is a direct reduction in the amount of taxes you owe. For instance, if you get a $2,000 tax credit, your tax bill drops by $2,000. The federal solar tax credit allows you to deduct a portion of your solar installation costs from your federal taxes, making solar energy more affordable.

Details of the Federal Solar Tax Credit

The federal solar tax credit is a financial incentive that helps reduce the cost of installing solar panels. Here’s how it breaks down:

• 26% Credit: For systems installed in 2020 and 2021.
• 30% Credit: For systems installed between 2022 and 2032.
• 26% Credit: For systems installed in 2033.
• 22% Credit: For systems installed in 2034.

After 2034, the credit is set to expire unless extended by Congress. Importantly, there’s no upper limit on the amount you can claim.

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Are You Eligible?

You can qualify for the federal solar tax credit if:

• You must have a federal tax liability to claim the credit. The credit is only available if you pay federal taxes.
• Your solar panels were installed between January 1, 2017, and December 31, 2034.
• The solar system is installed at your residence in the U.S.
• You own the solar system (you bought it outright or financed it).
• The system is brand new or being used for the first time.

What Costs are Covered?

Here are the expenses that qualify for the tax credit:

• The cost of solar panels or PV cells.
• Labor costs for installation, including setup and permitting fees.
• Essential equipment like inverters and mounting hardware.
• Energy storage devices with a capacity of at least 3 kWh (if installed after December 31, 2022).
• Sales taxes on eligible expenses.

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How Do Other Incentives Affect Your Credit?

1. Utility Rebates: Rebates from your utility company reduce the cost basis for calculating the tax credit. For example, if your system costs $20,000 and you receive a $1,500 rebate, your tax credit is based on $18,500.‍
2. Renewable Energy Certificates: Payments for renewable energy certificates are taxable income but don’t affect your federal tax credit amount.‍
3. State Rebates: Rebates from state governments don’t typically reduce your federal tax credit. So, if your system costs $22,000 and you get a $2,000 state rebate, your tax credit is calculated on the full $22,000.‍
4. State Tax Credits: State tax credits usually don’t reduce the federal tax credit, but they might affect your taxable income on your federal return.

How Truth In Solar Can Help

Navigating tax credits and incentives can be complex, but Truth In Solar is here to help! When you choose a TIS-certified solar company for your installation, we ensure you maximize your savings by guiding you through the tax credit process. Our experts can help you:

• Understand all eligible expenses.
• Calculate your potential savings.
• Complete necessary paperwork for the tax credit.

Ready to Go Solar?

Taking advantage of the federal solar tax credit can significantly reduce your solar installation costs, making renewable energy more accessible. At Truth In Solar, we’re committed to helping you every step of the way, from selecting the right solar system to ensuring you get the full benefits of available tax credits.

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Disclaimer: This guide provides a general overview of the federal investment tax credit for residential solar photovoltaics (PV). It does not constitute professional tax advice or other professional financial guidance. Always consult with a tax professional to understand how these credits apply to your specific situation. For more details, see the Treasury Department’s published Fact Sheet.