If you are thinking of installing solar panels into your home, then you may want to do it sooner rather than later. The current Solar Tax Credit will end in 2022, and until then homeowners and businesses can claim up to 30% tax credit for their solar panel installation.
What is the Solar Tax Credit (ITC)?
The Federal Solar Tax Credit, which is also known as the Investment Tax Credit (ITC), allows a homeowner to deduct 30% of the gross cost of installing a solar energy system from federal taxes.
The main requirements of the solar tax credits in 2019 are:
- You must own the solar panel system by purchasing your solar via cash or a solar loan (a lease or PPA financing cannot claim the solar tax credit)
- You owe income taxes, which the solar tax credit then reduces
One important benefit is that you can roll over your 30% tax credit to another year, so if you have already paid all your taxes for this year, you can allocate it to next year’s income taxes. This incentive has been huge for home and business owners since 2005 as part of the Energy Policy Act.
Although the Federal Government extended the incentive expiration date twice, the most recent 2016 solar panel extension in 2016 added a ‘step-down’ schedule. This step-down schedule gradually phases out the solar tax credit over a few years.
Here is the breakdown for the Solar Tax Credit step-down from 2019 to 2022:
2019: 30% tax credit
2020: 26% tax credit
2021: 22% tax credit
2022: 10% tax credit (for commercial solar only)
For this reason, being able to claim the solar panel tax credit in 2019 makes it more valuable,
Solar Energy is Good for Business and Homeowners
The solar panel tax credit applies to both residential and commercial systems, and there is no cap on its value. This means that most homeowners are essentially receiving a 30% discount on any solar panel installation they do in 2019.
In previous years, owners of new solar energy systems could not claim their tax credits until their solar panel system was operational.
However, the new legislation allows them to claim the tax credit as soon as the construction of the solar panel system is completed (as long as it is operational by December 31, 2023.)
How to Qualify for the Solar Panel Tax Credit
As long as you own your solar panel system, you are eligible for the Investment Tax Credit (ITC) credit.
And even if you don’t have enough tax liability to claim the entire credit in one year, you can ‘roll-over’ the remaining credits into future years up until 2022.
However, keep in mind that if you sign a lease or PPA with a solar panel installer, you are not the owner of the system, and cannot receive the solar panel tax credit.
If you have recently installed solar panels, remember to let your accountant know. Or if you file your own taxes, complete the IRS Form 5695, known as Residential Energy Credits,” and include the final result of that form on IRS Form 1040.
Remember to seek proper tax advice before filing, as GCE are expert solar panel installers, and cannot offer tax credit advice.
GC Electric Solar is recognized as one of the best rated solar panel installers in San Diego. We offer solar panel installation in Escondido, Temecula, Oceanside, Del Mar, and Poway. Our experienced engineers perform solar installations and ensure that your solar system will be installed according to the highest quality of workmanship available in the industry. Each project is based on your needs. Call us today to learn more about our Solar panel systems and how we can help you.