Get 30% from your federal taxes!
The federal solar tax credit, also known as the Investment Tax Credit (ITC), allows you to deduct 30 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value.
When you purchase your solar panel system, the cost of going solar includes any other improvements needed to facilitate the installation of a system. Meaning, if any electrical work, roofing, or energy efficient upgrades are made, you can add these additional costs as part of the total ITC. Inturn, receiving a 30% tax deduction on the total cost of all improvements.
In previous years, owners of new solar energy systems could not claim the tax credit unless their system was operational. Now, the legislation allows owners to claim it as soon as the construction of the system is complete.
Do I qualify for the solar panel tax credit?
There are 2 options - Buying & leasing. The ITC applies to anyone who purchases their solar energy system. If you don’t have enough tax liability to claim the entire credit in one year, you have the ability to “roll over” or spread the remaining credits into future years to suit your needs for as long as the tax credit is in effect.
However, if you sign a lease or PPA then you will not quality for the ITC.
How do I claim the solar panel tax credit?
When you file your yearly federal tax return, let your accountant or tax service preparation representative know that you’ve gone solar in the past year. They will handle it for you. Or, if you chose to file taxes on your own, you will need to complete IRS Form 5695, “Residential Energy Credits,” and include the final result of that form on IRS Form 1040.
The IRS Form 5695 calculates tax credits for a variety of qualified residential energy improvements, including geothermal heat pumps, solar panels, solar water heating, small wind turbines, and fuel cells.