Back in 2005, the U.S. Energy Policy Act was initiated, which provided tax credits for solar investors to save thousands of dollars when installing their solar panel system. Today, you can still claim 26% of the total cost to install solar panels into your home or business. The gracious tax benefits is part of the federal government’s push to replace fossil fuels with sustainable energy. The benefits are certainly plentiful, but the solar tax credit will soon expire in 2022, which means now is the best time to invest in solar before these benefits disappear.
At CRJ Contractors, we are experts in everything related to solar. We help many residents and business owners dedicated to investing in solar in the Colorado Springs region to make smart, educated decisions. Among a plethora of benefits of going solar such as solar rebates available to Colorado residents, saving the environment, and saving money on monthly electricity bills, are federal solar tax credits. Today, we are giving you the rundown on everything you need to know to claim your IRS solar tax credit to save you thousands of dollars.
What Is the Federal Solar Tax Credit?
The federal solar tax credit provides 26% of the total cost to invest in solar back into investor’s pockets in the form of solar credit. For example, if your total cost to invest in solar is $20,000, you would be owed 5,200 dollars in tax credits. That’s a fair chunk of money considering that you can save 14,000 dollars on electricity costs alone over a 20 year span.
However, solar credits are not rebates. You will not receive a check from the government for your investment in solar. Rather, solar credits will be applied toward your next tax return. For example, if you owe $2,500 in taxes, your solar credits will be applied, saving you on taxes you may owe. If you have remaining credits, these credits can roll over to the next year.
Requirements of the Federal Solar Tax Credit
In order to be eligible to receive 26% federal tax credits, otherwise known as the solar investment tax credit (ITC), you will have to buy your system outright. This means customers solar leasing or going through third party ownership (TPO) will not be eligible for these benefits.
If you decide to buy a solar system outright, here are a few things the tax credit covers:
- Equipment Cost
- Solar Consulting Fees
- Installer Fees
- Engineer Fees
- Permitting Fees
- Shipping Fees
The Federal Solar Tax Credit covers everything from your initial consultation to the final installation of your home or business solar system. You’ll even be able to use these benefits when installing your stand alone system, if you ever decide to go off the grid. In order to reap the benefits of all these costs, however, we recommend keeping your receipts in a safe place. They will be very useful around tax season.
How Do I Claim Federal Solar Tax Credit?
Once you’ve fully invested into solar, you’ll have to wait until tax season comes around to file for your tax credits. Be sure to do the following:
- Keep all your receipts, from installation to consultation fees, in a safe place.
- Confirm your eligibility for solar tax credits with tax representative (if you have your own system and owe taxes, you most likely are eligible).
- Complete IRS form 5695 using your receipts.
- Complete your 1040 Individual Tax Return and add your renewable energy credit information.
After this, all you have to do is wait. When the IRS contacts you again, you will have saved thousands of dollars by installing your own PV system, simply by investing!
Solar Tax Credit Schedule
Unfortunately, all good things must come to an end. The solar tax credit will expire in 2022 for residential customers. However, it will remain at 10% permanently for commercial projects. Here is the step-down schedule from 2020-2022:
- 2020 — 26%
- 2021 — 22%
- 2022 — 0% (10% for commercial use)
Claim Your Federal Solar Tax Credit Today | CRJ Contractors
Time is of the essence when it comes to investing in solar energy. The gracious tax benefits will not be here forever, however you can still claim 26% on investment tax credits (ITC) if you install your new solar system by the end of 2020. We claimed previously that from 2020 onward, solar is looking bright. While we can expect lower prices and better technology in the future, it’s up to Congress whether they will renew federal solar tax incentives. We can only hope!
At CRJ Contractors, we work hard to ensure that solar investors are getting the best deal possible. We believe that 2020 is the year to invest in solar while the federal tax credits still apply. Contact us today for a consultation! You will receive 26% off if you invest in a solar installation for your home or business today!