How Solar Panels Can Earn You a Big Tax Credit

Solar panels are an energy efficient way to produce electricity and they can also help you save money and earn a big tax credit. Solar energy is becoming increasingly popular as a reliable, renewable energy source and it’s no wonder why – solar panels can provide you with a steady stream of free electricity, as well as a sizable tax credit. In this article, we’ll explore what a solar tax credit is, how it works and how you can benefit from this financial incentive.

What Is a Solar Tax Credit?   

A solar tax credit is a tax incentive that is offered by the federal or state governments in the United States to encourage individuals and business owners to invest in renewable energy. This credit reduces the amount of federal income tax owed and can be applied directly to your tax return. Specifically, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 offers a 26% federal tax credit for solar investments, meaning that if you make a $10,000 investment in solar, you can claim a permanent tax credit of $2,600.

How Does the Solar Tax Credit Work?   

To qualify for the federal tax credit for solar installations, you must first choose an installer and purchase a solar energy system. In order to get the full 26% tax credit, you must own your solar installation outright. After your system is installed, you can claim the credit when filing your taxes. If you purchase a solar system on a loan, the credit amount is not eligible to you until the loan is completely repaid.

You can also claim a tax credit for any solar equipment purchases, including solar panels, inverters, mounting hardware and labor costs. The credits can be taken over multiple tax years, meaning the total credit can be spread out over several years if it exceeds the value of your tax bill one year.

What Are the Benefits of a Solar Tax Credit?   

The primary benefit of the solar tax credit is the significant financial savings it provides. By taking advantage of the tax credit, you can significantly reduce the costs of purchasing and installing a solar energy system. Additionally, solar energy has many non-financial benefits that you can enjoy, such as reduced utility bills and decreased emissions.

Other Federal Solar Tax Incentives 

In addition to the federal tax credit, you may be eligible for additional incentives. For example, the Solar Renewable Energy Credit (SREC) program guarantees that a specified amount of cash will be paid to solar owners for each megawatt-hour (MWh) of electricity produced by their system. The amount of the payment will vary depending on your state. The residential Energy Efficiency Property Tax Credit allows for a credit for up to 30% of the cost of energy efficient building components, including solar energy systems, up to $1,000.

State Solar Tax Incentives 

In some states, additional tax credits are available for solar energy system investments. For example, Illinois offers a renewable energy credit for 25% of system costs for residential solar systems. Each state has its own solar tax credit program, so it’s important to research the specific credit you are eligible for in your state.

Renters and Solar Tax Credits 

Unfortunately, renters are not eligible for the federal solar investment tax credit, and some state programs also have stipulations that prevent renters from claiming solar tax incentives. However, many states and municipalities are now offering community or shared solar programs, which allow apartment or condo dwellers to invest in solar energy systems and receive the respective tax incentives.

The solar tax credit is a great incentive for those looking to invest in renewable energy, as it can significantly reduce the cost of a solar energy system. With federal and state tax credits available, now is a great time to consider investing in solar energy and take advantage of the financial and environmental benefits of solar technology.

Similar Articles

Comments

Advertismentspot_img

Instagram

Most Popular