In the United States, there are over 2 million solar panel installations.
If you are thinking about installing solar panels on your home, you might be eligible for a solar tax credit.
But how much could you get back, and how do you qualify? Keep reading to find out all you need to know!
What Is the Tax Credit?
The tax credit is a reduction in the amount that you owe on your federal income taxes each year. For example, if you claimed $1,000 in tax credits, that would be a $1,000 deduction from how much you owed.
Sometimes people also call this tax an investment tax credit. However, it’s a little bit different if you’re talking about solar system installations.
Specifically, a solar tax credit is one that is specifically for installing a federal residential solar system. You can claim this on your income taxes for a percentage of the system.
This tax credit is only eligible in the tax year that you installed the system. For example, if you installed it in 2019, you claim it in 2020 on your 2019 tax return.
There is also no maximum to the amount that you can claim for a solar panel tax credit.
How to Qualify
If you want to get one of these tax credits, you’ll have to meet certain criteria to get it. However, it’s really flexible and easy to get them.
First, you’ll have to have installed a solar PV system by December 2023. You’ll also need to have this system installed on your secondary or primary home. You’ll need to own the system or have purchased it through financing.
It also has to be the first time that you’ll have used the system.
You’ll also need to estimate the value of the solar system in order to figure out how much you qualify for the tax credit.
How to Claim Tax Credit
If you meet all of the criteria for the federal solar tax credit, then you’ll have to take steps to claim the credit.
To claim it, you’ll have to fill out the IRS form for 5695 for a residential energy credit. This form will need information from your 1040 form.
You’ll also then need to calculate the cost of your system. This will include the purchase of all the equipment, the labor costs, and the fees for permits.
You’ll also want to include a rebate or tax credits you get through the state rather than the federal government.
You’ll also have to include information to show that you’re full-time or part-time residency.
Discover More About Getting a Solar Tax Credit
These are only a few tips on getting a solar tax credit for your solar panels, but there are many other factors to consider.
When in doubt, try talking to your CPA to ask them for help or advice on getting tax credits.
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