Tax Credits Available for Solar
Switching to solar energy can not only help reduce your carbon footprint but also save you a significant amount of money on taxes. The federal government and many state governments offer a range of tax incentives and rebates for those who install solar panels on their homes or businesses. In this article, we will explore the various tax savings available by switching to solar.
Federal Tax Credits
Tax Credits reduce your income tax in exchange for going solar. The ITC (Investment Tax Credit) allows homeowners and business owners who have purchased and installed solar photovoltaic (PV) energy generation systems in 2022 or will do so before 2033 to claim a federal tax credit equal to 30% of the overall cost of the system’s components, installation and associated fees during the year of installation.
A tax credit is a one-for-one dollar amount reduction from income tax that you would have paid without the credit. If your solar PV system costs $20,000 and you claim the ITC at 30%, you will owe $6,000 less in income tax for the year, effectively lowering the system’s total cost to $14,000.
As the new law currently stands, if the amount of tax you owe for the year you become eligible is less than the credited amount, you can roll the difference over to the following year. The ITC will lower to 26% in 2033 and again to 22% in 2034. The credit will be eliminated at the end of that year if it doesn’t receive another extension.
State Tax Credits
In addition to federal tax credits, many states offer their own tax incentives for installing solar panels. The availability and value of these incentives vary widely by state, but they can include tax credits, rebates, and exemptions from sales taxes or property taxes. For example, in California, homeowners who install solar panels can claim a state tax credit of up to $1,000. In Arizona, solar installations are exempt from property tax assessments for 20 years. In Massachusetts, solar installations are exempt from sales tax.
Another way that switching to solar can save you money is through net metering. Net metering allows solar panel owners to send excess energy back to the grid and receive credit for it on their utility bills. This means that on sunny days, your solar panels may generate more energy than you use, and that excess energy can be sold back to the utility company, reducing your overall energy costs.
Switching to solar energy is not only good for the environment, but it can also save you a significant amount of money on your taxes. With the federal Investment Tax Credit, state tax credits, and net metering, homeowners and businesses can enjoy substantial savings on their energy bills and taxes. If you’re considering installing solar panels, be sure to research the tax incentives and rebates available in your state to maximize your savings. Here is an excellent resource with updated Federal and State incentives: https://www.dsireusa.org. You can also call us today at 866-471-8852 to talk to one of our professionals who can explain all the benefits of switching to solar power and what incentives are available to you specifically.
Tax and credits or incentives including those provided by federal, state, or local governments may change or end. This can impact the amount of money you might save. Consult a tax professional to understand any tax liability or eligibility for any tax credits that may result from the purchase of your solar system.
If you have taxable income and own the system, you may qualify for the federal
investment tax credit (ITC). It is your responsibility to determine your eligibility and to
apply. Consult a qualified tax professional for assistance and details.