The Investment Tax Credit – Start Saving With Solar
For many reasons, making the shift to solar energy may be beneficial. Homeowners not only get the advantages of lower utility bills, self-generated energy and environmental responsibility but they also have the opportunity to take advantage of the Investment Tax Credit (ITC). This useful tax incentive can save millions of homeowners throughout the country an enormous amount of money!*
Do you already know about the ITC? Click here to speak with one of our solar experts to see if you qualify for this awesome incentive!
Whether you already have solar, are considering installing it, or are just starting to consider leaving fossil fuels behind, this guide will tell you everything there is to know about the ITC and how it may benefit you.
What is the ITC?
The Investment Tax Credit, or also known as the federal solar tax credit, “allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes.” Another great feature of this tax credit, is that the ITC applies to residential and commercial systems and has no cap on its value.
The History of the ITC
In 2005, the Energy Policy Act had established the ITC, and it was only supposed to last until the end of 2007. Since the ITC was so popular and supported the United States’ transition to renewable energy, it has been extended. In fact, since it was so successful, Congress had extended the deadline multiple times, most recently in 2020. However, the tax credit won’t the same, so now is the best time to act before it goes down in 2023!
How Does it Work?
First things first, you need to have solar panels! Next, you need to own your solar panel system. Even if you don’t have enough tax liability to claim the entire credit in one year, you can rollover the reaming credits into future years. Keep in mind that this is only valid if the tax credit is still in effect. However, keep if you lease or have a power purchase agreement (PPA) with your solar installer, you are not the owner of the system you cannot benefit from the tax credit.
Quick Facts: The ITC
- The residential and commercial solar ITC has helped the U.S. solar industry grow by more than 10,000% percent since it was implemented in 2006, with an average annual growth of 50% over the last decade alone.
- The 2020 extension of the ITC has provided market certainty for companies to develop long-term investments that drive competition and technological innovation, which in turn lowers energy costs for consumers.
- In December 2020, Congress passed an extension of the ITC, which provides a 26% tax credit for systems installed in 2020-2022, and 22% for systems installed in 2023. (Systems installed before December 31, 2019, were eligible for a 30% tax credit.) The tax credit expires starting in 2024 unless Congress renews it.
How to Claim the ITC
Now that you’re an expert on the history of the ITC, how can you claim its benefits? When you file your taxes with the IRS, you will want to file a Form 5695. You can fill out this form at the same time you would file your federal tax return. Be sure to mention to your accountant or tax professional that you’ve gone solar in the past year, or if you file your taxes yourself, you will just need to follow three steps.
- Determine if you are eligible for the ITC
- Complete IRS Form 5695
- Add your renewable energy credit information to your typical Form 1040.
- For more detailed information on the process and how it applies to you, please consult with an accountant or tax professional.
Go Solar with Momentum!
There is no better moment to switch to cleaner, more affordable energy than right now! Even though the ITC is still in force, it may not be for long. Our team has over a decade of expertise in the solar sector and is eager to assist with your project, regardless of the size.
Call us today to learn more at 1-888-MOMENTUM!
*Momentum Solar do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.