A solar tax credit is a federal government incentive designed to encourage individuals to invest in solar energy resources. The credit stands at 30% of the total solar panel installation, equipment, and labor cost.
It is currently known as Residential Clean Energy Credit but was initially called Investment Tax Credit (ITC). Since its introduction in 2005, it has driven the growth of solar energy uptake in the United States. This article will explore more about the solar tax credit and how it can help you.
How Does The Solar Tax Credit Work?
As a homeowner, when you invest in solar energy, you can claim a 30% tax credit of your total cost from the federal government. However, it is not a tax refund. Instead, it reduces the amount you owe in income taxes.
For example, if the gross solar system cost were $20,000, you would receive solar tax credits worth $6,000. ($20,000 x 30%= $6,000). After that, you would claim them and own $6,000 less in federal income tax.
To claim a it, you must have owed taxes to the government. That way, the two can cancel out partially or in whole. You cannot benefit from these credits if you have no income or are retired, meaning you don’t owe any taxes.
Note: you can claim solar tax credits against federal income tax or the alternative minimum tax. That means you are eligible to benefit regardless of how you calculate your owed taxes. However, they do not apply to any state or local taxes.
What Does The Solar Tax Credit Cover?
According to Energy.gov, solar tax credits cover the following: (1)
- Installation labor
- Sales tax
- Solar panels
- Balance-of-system equipment (racks and conduit)
- Inspection costs, permitting fees, and other soft costs
- Energy storage devices (batteries), whether attached to the system or not
However, the solar tax credit does not apply to roofing expenses. If you need to replace or remodel your roof before installing the solar panels, those costs are not included in the tax credit. But if the roof is part of the solar system and counts as solar equipment, it gets covered.
Work With Wayne Solar
At Wayne Solar, we seek to help homeowners benefit from solar tax credits by providing high-quality solar panel installation services. We are here to guide you as you switch to solar and reduce your energy bills.
We are privileged to serve Ormond Beach, Daytona Beach, New Smyrna Beach, St. Augustine, Ponce Inlet, and Daytona Beach Shores, as well as the nearby communities. Contact us today to learn more about our solar services and systems and how we can help you take advantage of solar tax credits.
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