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
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
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.