Solar power has already accounted for nearly half of all new electricity-generating additions in the US in 2022.
Many people are switching to solar energy to use a cleaner form of energy and save money.
Since the installation process and equipment can get expensive, it’s helpful to know about credit options.
Continue reading to learn more about solar tax credits and how you can be a smart homeowner!

What Is the Solar Tax Credit?

Solar tax credits are claimed on federal income taxes and they can help you cover energy costs.
You can get back a percentage of the cost of your solar panel system if you qualify and apply for this credit. The great thing about solar tax credits is they have no maximum amount to claim, so you can get as much assistance as possible.

The solar tax credit incentive began in December 2020. Congress had passed an extension on the ITC bill, assisting homeowners. This incentive is meant to encourage people to go green and look for cleaner sources of energy.

Requirements for Eligibility

If your solar panels were installed between January 1, 2006, and December 31, 2023, you might qualify for the credit.The solar system should be at your primary or secondary place of residence, but you can also use them in off-site communities. For example, if you’re working on a solar project and create more electricity than you consume, you can get reimbursed. The IRS will help purchase a portion of the solar community, funding the project.

To be eligible for this incentive, you must also be the owner of the solar system. Whether you paid in cash or are financing your panels, you must show ownership. If you are leasing the panels or have the arrangement to own them in the future, you don’t qualify.It’s also important to note that the solar tax credit can only get claimed on original installation equipment.

What If My Panels Aren’t Installed?

If you own solar panels but haven’t installed them yet, you are not eligible for the tax credit.
These solar incentives are meant to help people that are producing energy. The solar panels must be in place and working during the tax year you want to claim them.

Although they won’t measure how much energy you use, they still check that energy is getting produced. If you don’t live in your home yet because it’s being built you can claim it on your taxes as long as the panels have fully been installed.

If you need help getting your panels up, you can receive services via Blue Raven in Minneapolis.
Not the Homeowner?

Most people don’t claim the solar tax credit because they assume they don’t qualify if they aren’t the homeowner.You don’t have to be the homeowner to get the credit if you are a tenant-stockholder. Members of condos are also eligible for the tax credit, even though they don’t own all of the property. If you can prove that you’ve contributed to the costs of the solar system, you can get the tax credit.

If you are renting a home or apartment and the landlord installs the solar system, you will not qualify. Since tenants aren’t responsible for the maintenance, they don’t get the incentives.

Your Panels Aren’t on Your Home’s Roof Whether your solar panels are on the roof or located somewhere else on the property, you can claim the tax credit.If the panels are working properly and generating electricity for the home or property, you can get financial help.

When you have a home office and work from home, your residence also becomes a commercial space. You still qualify for the residential tax credit, however, as long as you’re living in the same building. You will lose the credit if you are consuming 80% or more of the electricity for work purposes, rather than living.

Are You Connected to the Grid?

Even if you aren’t connected to the electric grid, you can still get the solar tax credit.
As long as the solar PV system is generating electricity, on or off the grid, you can claim your credit. The residential solar credit is an incentive for anyone switching to renewable energy. Whether they contribute to grids or not.

Coverage

Understanding what expenses get covered in the tax credit is about as important as the process of getting it.
The largest expense that homeowners receive a credit on is the installation and preparation. All the labor costs for installing and onsite preparation can be reduced when you file your paperwork. You will save money on inspection costs, developer fees, and permits.

Sales tax for certain expenses will permit you to a tax credit. Another large item covered by the tax credit is energy storage devices.

Solar PV panels and cells used to power attic fans are even covered!

Solar Tax Credit & Financing

If you are currently financing your solar panel installation, you can still qualify for the tax credit.
When you finance these projects, you are obligated to pay for the panels at full price. Since this is a legal contract, you can claim the credit, still using the full cost of the installation.

Keep in mind that the interest you owe on financing and origination fees doesn’t apply to the credit. Your warranty expenses are also disregarded when calculating your total tax credit.

Steps to Claim Your Credit

Unfortunately, the government won’t automatically send you credit once you install your panels.
There are a few steps you’ll have to take to guarantee that you get your money. After you’ve reviewed the qualifications and installation paperwork, you can move forward. Make sure you keep your tax credit documents, taxes paperwork, and installation details organized.You can discover how to get help with the documentation below, but you must get prepared.

Speak With a Financial Advisor

The first step in claiming your solar tax credit is to find a tax or financial advisor.Once you have an advisor by your side, they can help determine if you’re eligible. They will ask you various questions and may request documentation, but this all helps you make more money in the end. Don’t be afraid to ask questions about the incentive and how your refunds will get affected.The more that you work with your financial advisor, the more assistance they can offer.

Complete IRS Forms

If you want to get reimbursed for your investment in solar energy, you’ll have to complete IRS form 5695.
While you file your annual taxes, this additional form must get attached. You must follow the instructions to ensure they will process your paperwork. File your taxes as you would any other year and always check that you are completing the right documents.

Having a financial advisor helps because they know what forms are necessary and can even file them on your behalf.

Submit Your Taxes

As you file your IRS forms, your federal refund will reflect how much money you are owed.
The IRS will verify the info you provided on the documents and calculate how much money you will get. This money gets distributed with the remainder of your federal tax return. Most people recieve their refunds through direct deposit, but they may also come through the mail.When you go to submit your taxes, have your financial advisor review the information before sending it. When errors occur, they can delay your refund significantly or disqualify you for credits.

What to Expect Looking Forward

Currently, homeowners get a 26% tax credit when they qualify for their solar panels.
This excellent credit rate is in place for the years 2020-2022. Although the credit is anticipated to decrease a little in the coming year, it will remain above 20%. The solar energy tax credit is due to expire in 2024, but Congress will have the chance to renew it.There is a lot of hope that the incentives will get renewed, especially as the country makes more sustainable choices. President Biden is also taking steps to ensure a 10-year tax credit for renewable energy investments. This is a bold effort to use clean energy and sustain the planet.
As President Biden shares info about the Inflation Reduction Act and renewable energy, you can discover benefits.

Reap the Benefits from Solar Tax Credits

Learning about solar tax credits can help you determine if you qualify and can get reimbursed.
Since solar panels can be a large investment, you don’t want to miss out on any money-saving tactics. Although the tax credit won’t pay you back for the full cost, you will quickly notice savings with your utility bills. Don’t be afraid to switch to solar, whether you are on or off the grid, you can get various incentives.
Take time to research the best solar installation companies in your area and connect with your financial advisor.If you want to learn more about solar electricity and how to live a more sustainable life, check out our blog for the latest content!