Homeowners can save a significant amount of money with solar panels are through federal, state, county and utility rebates. Solar tax credits are a federal incentive that give homeowners a 26% credit that can be applied to their annual taxes. On top of that, you likely also can apply statewide rebates and incentives.
Are you wondering how you should apply for these credits when it’s time to file your taxes? Read on to learn more about tax credits and how to claim them!
Federal Tax Credits
Tax credits are a great way for residents who own their solar panel systems to earn money back. The Federal Tax Credit allows solar energy owners to deduct 26% of the cost of installing the solar system from their federal taxes.
The Federal Tax Credit applies to both residential and commercial systems. This credit can be applied to personal income taxes that would otherwise be payed to the federal government.
This deal will not last forever. Residential and commercial solar energy system owners can deduct 26% of the cost of installation for systems that have begun construction through 2020. The tax credit then decreases in slow increments annually until 2021, where it is projected to stay at 10%. You’ll get the best deal if you switch to solar energy today!
How to Apply
If you already own a solar panel system, you may be wondering what the next steps entail. First, we recommend checking that you qualify for this tax credit. Make sure all these boxes are checked before you move on to the next step:
- Installed your system in 2020
- Generate electricity with your panels
- Own your solar panels
If you said yes to all these conditions, then you’re ready file for your tax credits! Keep in mind that you take the amount directly off your tax payment, rather than as a deduction from your taxable income.
When you’re ready to claim your credit, you are going to need to file IRS Form 5695 when doing your tax returns. You will be instructed to calculate your credit on the form.
Rental properties can get a little tricky, but you can claim the residential solar credit if you live at the house for part of the year. To make up for time not there, you will have to reduce this credit. For example, if you live at your rental home for three months of the year, you will be able to claim 25% of the credit .
As an example, if your system costs $10,000 and the full credit is $2,600, you can claim 25% of this amount which totals $650.
If you need any assistance claiming your federal tax credits, need help researching statewide incentives or simply have questions about your savings, the solar specialists at Momentum Solar are happy to help. We’re experts in finding our customers the best deals while providing high quality systems that produce clean, price-protected electricity.
Momentum Solar is a full-service solar energy company that handles everything from initial assessment all the way through installation and energization. Visit www.momentumsolar.com or call 1(888)-MOMENTUM for assistance filing for tax credits or for more information about our services.