17 May The Federal Tax Credit for Solar: What You Need to Know
The US federal government recognizes the importance of solar energy and provides incentives to encourage people to invest in solar panels. One of these incentives is the federal tax credit for solar panels. Learn more below about how the US federal tax credit for solar panels works.
What is the federal tax credit for solar panels?
The federal tax credit for solar panels, also known as the Investment Tax Credit (ITC), is a tax incentive provided by the federal government to encourage the use of solar energy. The ITC provides a dollar-for-dollar reduction in the income taxes that a person or business owes, based on the cost of installing a solar energy system.
How does the federal tax credit for solar panels work?
The federal tax credit for solar panels provides a 30% tax credit for residential and commercial solar systems installed between January 1, 2022, and December 31, 2032. This means that if you install a solar energy system in your home or business, you can receive a tax credit worth 30% of the total cost of the system.
To qualify for the federal tax credit for solar panels, the solar energy system must be installed on a property owned by the taxpayer. The property must be used as a residence or a business. The solar panels must also meet certain efficiency and safety standards.
The tax credit is claimed on the taxpayer’s federal income tax return. If the taxpayer cannot use the full amount of the tax credit in the first year, the remaining credit can be carried forward to the following year.
How much can you save with the federal tax credit for solar panels?
The amount of money you can save with the federal tax credit for solar panels depends on the cost of the solar energy system you install. For example, if you install a solar energy system that costs $9,000, you can receive a tax credit worth $3,000 (30% of $9,000). If you install a solar energy system that costs $18,000, you can receive a tax credit worth $6,000 (30% of $18,000).
It’s important to note that the federal tax credit for solar panels is set to decrease in the coming years. After December 31, 2032, the tax credit will be reduced to 26% for residential and commercial solar systems installed in 2033, and 22% after 2034. The tax credit is set to expire in 2035 unless congress votes to renew it.
Read more about the the federal tax credit on the Department of Energy’s website HERE.
The federal tax credit for solar panels is a great incentive to use solar energy. If you’re considering installing a solar energy system in your home or business, now is the time to take advantage of this full 30% tax credit. Talk to one of our team members today to learn how you can use this great benefit when installing your panels.