Federal Tax Credit for Residential Solar Energy
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What is a tax credit?
A tax credit reduces the amount of tax you owe dollar-for-dollar. For example, if you claim a $1,000 federal tax credit, your federal income tax is reduced by $1,000.
What is the federal solar tax credit?
The federal residential solar energy credit is a tax credit claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system.
To be eligible for the tax credit, you must completely install the solar system during the tax year and produce electricity for a home located in the United States. There is no maximum amount that can be claimed.
Congress passed an extension of the ITC in December 2020, which provides a 26% tax credit for solar systems installed in 2020-2022 (down from 30% in 2019). This amount will decrease to 22% in 2023. Unless Congress renews it, the tax credit will expire in 2024.
Who is eligible for the federal solar tax credit?
You could be eligible for this tax credit if you meet all of the following criteria:
- Your solar PV system was installed between January 1, 2006, and December 31, 2023.
- The solar PV system is located at your primary or secondary home in the United States or for an off-site community solar project – as long as the electricity generated is credited against, and doesn’t exceed, your home’s electricity consumption. The IRS allows a taxpayer to claim a section 25D tax credit for the purchase of a portion of a community solar project.
- You own (purchased with cash or through financing) the solar PV system. You are not eligible for the tax credit if you are leasing or are in an arrangement to purchase electricity generated by a system you don’t own.
- The solar PV system is new or being used for the first time, and you can only claim the credit on the “original installation” of the solar equipment.
What expenses are included?
- Contractor labor costs for onsite preparation, assembly, or original installation – including permit fees, inspection costs, and developer fees
- Solar PV panels or PV cells used to power an attic fan (but not the fan itself)
- Energy storage devices that are charged exclusively by the associated solar PV panels – even if the storage is placed in service in a subsequent tax year to when the solar energy system was installed. The energy storage devices are still subject to the installation date requirements.
- Balance-of-system equipment – including mounting equipment, inverters, and wiring
- Sales taxes on eligible expenses
Malek Solar Proudly Serves Bryan/College Station and Central Texas
Going solar is a low-risk, high pay-off investment – and now is the time to take advantage of the federal solar tax credit before the incentive expires. Contact us today if you’re ready to save money, increase your energy independence, lower your energy costs, and help the environment.
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