Can You Get A Tax Credit On Solar Panels?

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• on April 13, 2023
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Like many people, you might initially consider installing solar panels to reduce your electricity bill. Most likely, you also feel good about contributing to the growing use of clean and sustainable energy. Solar power systems can also increase property values, and many people can qualify for generous financing deals.

Access to clean energy and a chance to save money should motivate many homeowners to consider installing a solar power system. Few other home improvement options offer so many valuable benefits in return for an investment. Enjoy even better returns with valuable tax breaks and other incentives for installing solar power at home.

Tax Credits for Installing Solar Panels

If you need even more motivation to transform your home to renewable power, you should know that your home solar power system can qualify for generous tax credits. For instance, federal tax credits can defray the cost of a solar panel installation in Orlando and other cities by as much as 30%. If a $15,000 installation only costs $10,500, you can enjoy greater benefits with reduced power bills, a smaller loan, and a higher market value for your property.

The Federal Solar Tax Credit

This federal tax credit applies to home or business solar energy systems installed between 2023 and 2035. The credit remains at 30% until after 2032. Congress has scheduled this credit to expire in 2035, but the government might choose to renew it. Taxpayers must add IRS Form 5695 to their federal tax returns to get this credit.

This credit applies to new solar power systems installed in the United States and is valid for the tax year of completing the installation. This tax break covers most expenses, including labor, solar panels, equipment, storage devices, and even sales taxes. Only owners of solar systems can apply for this credit, but the owners can use it for homes other than their primary residence.

A refundable credit could generate returns larger than the tax liability, resulting in lower tax bills or higher refunds. That tax credit is not refundable. However, the IRS lets taxpayers carry over additional amounts of the credit in succeeding years. Thus, this tax break can benefit taxpayers without a significant tax liability in a single year.

Other Solar Power Incentives

Besides the Federal Solar Tax Credit, other incentives can help reduce the cost of installing solar power even more. However, some of these programs may impact federal taxes in various ways.

Solar energy incentives vary considerably by state and utility company. To understand available options, consider these common incentives and how they might affect federal tax credits:

• Electric company incentives: Some utility companies offer incentives for solar power installations. They might also pay for excess power generation. You would subtract installation subsidies from utility companies from expenses, thereby reducing the solar tax credit. However, payments for excess power generation or renewable energy certificates don’t impact the tax credit but may count toward taxable income.
• State rebates and credits: Rebates for installing solar power from state governments will differ from power company rebates because they won’t impact federal tax credits. State tax credits may impact federal taxes by reducing the amount of deductible state taxes paid, but they will not change the amount of the credit.

Homeowners may enjoy even more incentives to purchase a solar energy system. For example, states, utility companies, and other organizations may offer subsidized loans that help reduce interest rates and help more buyers qualify. In addition, a few localities prohibit using the increased property value derived from solar panels to calculate property taxes. A few states also exclude purchases of solar power systems and equipment from sales tax.

Solar Power: Save Money and the Planet

Home solar power systems typically range from $15,000 to $25,000. That might seem expensive, however, these systems can help homeowners generate their own electricity and drastically reduce power bills. Incentives from federal and state taxing authorities, power companies, and other organizations can significantly reduce the cost. Meanwhile, accessible loans make generating solar power at home even more affordable. A quality solar power company will help you uncover available options in your local area.

SOURCES

https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics
https://www.forbes.com/home-improvement/solar/solar-tax-credit-by-state/
https://www.forbes.com/home-improvement/solar/cost-of-solar-panels/