How Solar Can Save You Money On Your Taxes in 2019
At this point, you've likely heard the pitch for solar panels: you install solar, you save money on your power bills. While this proposition alone is enough to get many homeowners excited, some homeowners are discouraged by the time solar takes to return the initial investment. What these homeowners don't realize is that solar can save homeowners money in the first year of installation. While some of this money can come in the form of savings on power bills, the majority of the return on investment in the first year comes in the form of the Federal Solar Tax Credit, which can save homeowners who go solar a ton of money in the form of a big tax credit. For those that don't know, the Federal Solar Tax Credit - or the Solar Investment Tax Credit was established by The Energy Policy Act of 2005, and was initially applied to solar panel installations, solar water heating systems and fuel cells. The Solar ITC has been extended several times, but will be phased out, beginning after 2019. Solar ITC Phase Out After 2019 the phase out of the Solar ITC will go as follows: in 2020, the credit drops to 26%, in 2021 it drops to 22%, and then in 2022 it goes away completely for residential installations and drops to 10% for commercial installations. So homeowners trying to get the most out of the credit should go solar this year, in 2019 to get the most money back. If this is confusing, check out this graphic representation of the phase out below. How the Federal Solar Tax Credit works is that, currently, the 30% credit, which is 30% of the total cost of your solar installation, is applied to what you owe the federal government on your federal taxes. So, for example, if the total cost of your solar installation is $20,000, then the credit would be 30% of that, or $6,000. So, by going solar and receiving the credit, you can take that $6,000 and subtract it from what you owe the federal government on your taxes at the end of the year. If you don’t owe the federal government enough on your taxes to recoup the whole tax credit in the year that you get solar installed, you have roll the credit over to the next year. So say you get that $20,000 solar system, and as a result that $6,000 dollar credit. Then say, for example, that you owe $3,000 to the federal government in taxes. So, for the year that you got installed, you would owe nothing back to the Federal government. Then, because you have not utilized the full amount of the Tax Credit, that remaining $3,000 would be rolled over to the following year. So if you only owe another $3,000 the next year, then that credit would roll over and you would not have to pay anything again that next year. So if you’re a person that typically owes only a few thousand in taxes every year, you can potentially not have to pay any federal taxes for a few years after installing solar. There are certain requirements you must meet in order to qualify for the 30% Tax credit. Those include: The solar system must be installed and activated, or construction must start, before December 31, 2019. You must own your home or business that the solar is being installed on. Renters are not eligible. You must own the solar panels that are installed. Leased solar panels do not qualify for the tax credit. You must owe enough taxes to the federal government to use the credit against what you owe. It is a credit, not a rebate, so if you don’t owe, you can’t recoup the credit. Do I have to Purchase My System to Qualify? Many homeowners think they have to purchase their solar system outright in order to qualify for the Tax Credit. This is not necessarily true. Although an outright purchase is the most surefire way to get the credit as you own the panels, and therefore the credit, homeowners who go solar with a loan can also qualify, even if they put $0 down. Even if you go with a solar lease, most times, the installer will pass the savings they get from owning the panels down to you in the form of savings. So while you won’t be claiming the savings in the form of a tax credit, you will be saving the amount of money that you would have recouped from the credit. How Do I Claim My Solar Tax Credit? Once you’ve gone solar, claiming the solar tax credit is pretty easy. Basically, when preparing to do your taxes you have to complete form IRS Form 5695, “Residential Energy Credits” which is available in PDF form on the IRS’s website here. You then include the completed result of that form on the IRS Form 1040. Lucky for you, we have provided instructions on how to fil out IRS Form 5695. So if you get hit with a huge tax bill this year, and you’re a homeowner, you should consider going solar this year - in 2019, to save the most amount possible on your taxes for the following year. This is the last year to get the full 30% Federal Solar Tax Credit, the last year to get the government to basically pay YOU for going solar. You can save a ton of money on your taxes, and get solar installed - an investment that will provide amazing return and save you money for years to come. It seems like a no brainer right? That’s why you should call us today to get you’re solar system installed in 2019, and get the most out of the Solar Tax Credit.
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