Federal Solar Tax: What You Need to Know
Whether you’ve thought about going solar for awhile or some friends just told you how much they save on their electric bill every month, there are a number of great reasons to go solar. Plus, there’s never been a better time – the federal solar tax credit will decrease by the end of this year, so we’ve put together a few common questions that customers have asked!
What is going to happen if you wait until 2020 to go solar?
The federal solar tax credit will drop from 30% to 26% at the end of 2019 and continue to drop until it reaches 0% by 2022.
What is the federal solar tax credit?
The federal solar tax credit, also known as the investment tax credit (ITC), allows you to deduct 30% of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems and there is no cap on its value. The ITC was extended by the federal government in 2015 and will continue to allow the taxpayer to claim a credit of 30% until the end of 2019. Expenditures with reference to the equipment are treated as made when the installation is completed.
What if you don’t owe as much in taxes at the end of the year as 30% of the value of my system?
The ITC is a credit, not a rebate. This means you must have enough tax liability to get full use of the credit. However, if the federal tax credit exceeds your tax liability in the year of installation, the excess amount may be carried forward to the next taxable year. Some people are concerned that if they have money taken out of their checks each pay period, that they may not qualify for the incentive at the end of the year. This is not the case, where you have paid tax in installments during the year then the value of the tax credit would be issued as a refund.
Ready to talk about how big your tax credit can be after you go solar? Contact us today to set up an appointment and learn more!