Federal Tax Incentives For Solar Power

The federal government provides a solar tax credit known as the investment tax credit itc that allow homeowners and businesses to deduct a portion of their solar costs from their taxes.

Federal tax incentives for solar power.

The federal solar tax credit also known as the investment tax credit itc is one of the best financial incentives for solar in the united states it allows you to deduct 26 percent of the cost of a solar energy system from your federal taxes and there s no cap on its value. To claim the credit you must file irs form 5695 as part of your tax return. Homeowners solar companies and industry advocates alike were given a big christmas gift in 2015 when congress approved the 2016 federal spending bill and extended the solar panel tax credit. The residential renewable energy tax credit as the irs calls it can be an attractive way to save on the significant cost of installing solar panels or roofing an average sized residential solar.

It will remain at 30 for residential consumers until the end of 2019 so you re running out of time to take advantage of the full credit. Starting in 2020 the value of the tax credit will step down to 26 and then again to 22 in 2021. The federal solar tax credit gives you a dollar for dollar reduction against your federal income tax. Federal tax credit would be calculated as follows.

The solar investment tax credit itc is a tax credit that can be claimed on federal corporate income taxes for 30 of the cost of a solar photovoltaic pv system that is placed in service during the tax year 1 other types of renewable energy are also eligible for the itc but are beyond the scope of this guidance. The december 18 bill contained a 5 year solar tax credit extension which makes solar energy more affordable for all americans. The 30 tax credit applies as long as the home solar system is installed by december 31 2019. You calculate the credit on the form and then enter the result on your 1040.

By 2020 it ll be worth 26 then 22 in 2021. However when you receive a state tax credit the taxable income you report on your federal taxes will be higher than it otherwise would. The federal government is gradually going to phase out the solar tax credit. If you end up with a bigger credit than you have income tax due a 3 000 credit on a 2 500 tax bill for instance you can t use the credit to get money back from the irs.

If you install solar panels before the end of 2020 you will receive a tax credit that is equal to 26 percent of the cost of your solar installation. 0 3 18 000 5 400 state tax credit state tax credits for installing solar pv generally do not reduce federal tax credits and vice versa. The federal solar tax credit also known as the solar investment tax credit or itc is the single most important solar incentive available in the united states.