For the past decade, the federal government has provided incentives for homeowners to switch to solar through the solar investment tax credit (ITC), also known as the federal solar tax credit. The credit lets homeowners claim a certain percentage of their solar installation costs as a deduction on their federal taxes.
This article will explain more about the federal ITC incentive and how you can get it when you install new solar panels.
What Is the Federal ITC Incentive?
The Federal ITC Incentive is a credit you claim on your federal income taxes and is not a tax deduction. Instead, it helps reduce the taxes that you owe the government. This credit applies to the costs of installing a solar photovoltaic system in that tax year. Currently, there is no maximum amount that you can claim for your solar installation.
How Does the Federal ITC Incentive Work?
You can claim the federal solar tax credit if you are a U.S. homeowner and install your own solar panel system. However, you can only claim it once. And if you owe less than the tax credit you earn, it will roll over to the following year.
How Can I Claim the Federal ITC Incentive?
Homeowners can claim the solar tax incentive as part of their annual federal tax return with the Internal Revenue Service (IRS). The solar provider you use for your installation should supply you with the documentation and instructions you will need. Here are some additional steps to take in claiming the tax credit:
- Download IRS Form 5695 as part of your tax return
- Calculate the credit and file your solar system as “qualified solar electric property costs”
- Then, on line 1, write down your project’s total costs from your written solar contract
- Complete the necessary calculations
To ensure you get the tax credit, you should consult with a tax expert and your solar installer to ensure you claim the Federal ITC Incentive correctly. You can also check for any sales and property tax exemptions that may be available in your state.
How Do I Know if I Qualify for the Federal ITC Incentive?
The Office of Energy Efficiency and Renewable Energy (EERE) created a set of criteria to determine whether you will qualify for the Federal ITC Incentive. The requirements are as follows:
- You installed your solar system between January 1, 2006, and December 31, 2034.
- The solar system must be brand new and not be repurposed or reused.
- The solar system must be located at your primary residence or secondary home in the United States. It may also be used at an off-site project as long as the electricity is credited against your home’s electricity and does not exceed it.
- You own the solar system. You cannot claim the credit if you are leasing it or in an agreement to purchase electricity generated by the system.
Switch to Solar Confidently with Solar-Verse
At Solar-verse, we provide professional solar panel installation and assessments for homeowners and business owners across Maryland. We pride ourselves on being a customer-centric company that is always looking out for our client's best interests.
If you're interested in learning more about solar or getting a quote for your home or business, our expert solar technicians are standing by to answer any questions you may have. Get in touch by calling (443) 455-0313 or through our contact form.