Federal Tax Credit Explanation | Solar Panels | Backwoods Solar
26% Federal Tax Credit Ends 12/31/2023
Read Further To Find Out How To Save Money On Your Next Installation
For the most current information regarding this federal program visit: Residential Energy Efficient Property Tax Credit
To explore state rebates and incentive programs visit: www.dsireusa.org
The The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the 26% Federal Tax Credit for solar, wind and geothermal electric systems through 2023. Combined with state rebates and low component prices the savings can be even greater.
The current credit allows taxpayers to potentially claim a credit of up to 26% of qualified expenditures (including labor) for a system that serves a home located in the United States that is owned and used as a residence, even part time, by the taxpayer.
Tax Credit Details: (Be sure to contact your accountant/tax advisor to see how these incentives affect you.)
• 26% tax credit on your tax return through 2023.
• Applies to solar water heating, small wind energy and geothermal heat pumps, as well
• Includes installation and labor costs
• Applies to both Residential and Commercial installations
• There is no cap on how much you can claim
• Residential installations can claim the tax credit as soon as the system is complete.
but have until 12/31/23 to get it operational.
• You must own your panels. Not valid if you lease panels or signed a Power Purchase Agreement (PPA)
• This is a credit, not refund, so you can’t get more back in a single year than you owe. The remainder of any credit will roll to next year’s taxes. Will rollover
as long as the credit is in effect.
• You need to fill out IRS Form 5695 before filing your taxes and include it with filing
• Includes cost of conduit or wiring to connect the system to the home or business
• For new home construction the “placed in service date” is the date of occupancy
• The system does not have to go on the homeowner’s primary residence but they must use it as a residence for at least part of the year. Credit is prorated based on the percent of the year the homeowner lives there.
• The credit doesn’t apply to rental-only properties
• Stand-alone energy storage systems do not qualify but when coupled with PV they do.
• Keep your receipts for everything! Covered expenses include:
Solar consulting fees
Engineering fees
Permitting fees
Solar equipment
Freight and shipping costs
Tools and equipment that were rented or purchased for the job (lifts, ladders, scaffolding, etc)
Consumables – nuts, bolts, screws, wire, etc
Electrician fees
Professional installation fees
• For residential installations, the 26% tax credit is applied AFTER deducting any state or utility rebates
• For commercial installations the 26% tax credit is applied before any state/utility rebates but the credit is treated as earned income so tax must be paid on it
• Renters do not qualify for the credit if installing it on their residence
• The credit also applies to equipment added to pre-existing solar electric systems, such as a new battery bank
Examples of how this works:
If your PV system was installed by 12/31/2020 and costs $9,000 & your tax liability for the year is $6,000. You would reduce your tax liability by $2,340 (26% credit) and only pay $3,660.
If your PV System was installed by 12/31/2020 and costs $6,000 and your tax liability for the year is $1,000. You would eliminate your tax liability for the year, and have the option to carry the remaining credit over to the following year.
For the most current information regarding this federal program visit: Residential Energy Efficient Property Tax Credit
To explore state rebates and incentive programs visit: www.dsireusa.org
(Be sure to contact your accountant/tax advisor to see how these incentives affect you.)
