The upfront cost can be one of the most significant barriers to solar implementation. However, incentives like the Federal Solar Tax Credit can save you hundreds of dollars on your first investment.
Let’s break down how much you can save with it.
The Solar Tax Credit: What Is It and How Does It Work?
The solar tax incentive is a refundable credit you can claim on your yearly tax return. This tax credit is based on a percentage of the cost of installing a home solar photovoltaic (PV) system, rather than a fixed monetary sum. Currently, the tax credit is worth 26% of your entire system cost.
If you don’t have any tax credits, they can assist you to lower the amount of money you owe on your income tax returns.
A solar tax credit is available to every homeowner who installs a solar system on their home in the United States. It isn’t required that it be your primary property.
During the tax year, the system must be operational. As a result, if you install and start using a domestic solar system in 2021, you’ll be able to claim the credit on your 2021 tax return.
The credit is now being phased out, meaning its value is progressively declining. If Congress does not extend the credit, it will be phased out entirely.
What Is Included in the Tax Credit?
The federal solar tax credit now pays 26% of the following expenditures for homeowners who install and start utilizing a solar PV system.
- Solar panel installation labor expenses, including fees for permits and inspections.
- Solar batteries, which are energy storage systems solely fueled by solar panels.
- Inverters, wiring and mounting hardware are all included in the price of the solar system.
Do You Qualify for the Tax Credit?
When filing your 2021 taxes, you must fulfill the following conditions to claim the federal solar tax credit and get money back on your solar investment:
- Your system must be installed in either your permanent or temporary residence.
- The solar system must be brand new or have never been used previously. This credit may only be used once for your solar PV system’s “initial installation.”
- Your solar PV system must have been installed and functioning no later than Dec. 31, 2021.
- The solar PV system must be yours. If you lease your system, you will not be eligible for the tax credit.
How to Claim the Solar Tax Credit
Filling out IRS Form 5695 and submitting it with your annual tax return is all it takes to claim the federal solar tax credit. This form is available for download directly from the IRS. If you employ a tax preparation service or a tax expert, they can help you fill out this form.
Your Local Solar Company
For decades, Aztec Solar has been installing solar energy systems throughout Northern California. Our clients would never consider powering their homes in any other way after converting to solar.
Not only will our team of experts give exceptional customer service, they will also be able to decide which options are best suited to your needs.
Get in touch with us today!
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