As if installing solar panels doesn’t already give you various advantages, you can further your benefits by claiming a solar tax credit. Also known as investment tax credit, or ITC, it lets you deduct 26 percent off the price of installing solar panels from your federal taxes. So, not only will you receive reduced or eliminated electricity bills, a higher ROI, and an increased value for your business or home, but you’ll also receive a tax break once the system is complete.
Understanding the Solar Tax Credit
If you’ve been considering getting solar panels to take advantage of a renewable energy resource for your business or home, 2020 is the ideal time to take the leap. With the federal solar tax credit, you can save money on installing a system that can help reduce your energy bills for years to come. However, you only have a short time to act.
What Is a Solar Tax Credit?
The investment tax credit (ITC) is a tax incentive designed to make solar energy more affordable for American homeowners and businesses. The ITC permits you to deduct 26% of the cost of installation for a commercial or residential solar energy system. The credit is on your federal taxes, and there is no value cap on the deduction.
The tax credit essentially can be used toward the federal taxes you owe. It does not deduct your gross income but rather helps you pay what you owe.
Do I Qualify for This?
If you installed solar panels or will install them by December 31, 2020, and you own your solar energy system and property, you will likely qualify whether you have a residential or commercial system. If you lease your system, you won’t be eligible for the tax credit.
To get the incentive, you will need to keep the receipts for the system and claim the credit on your taxes, just as you might claim any deduction. If you cannot claim the whole credit in one tax year because you do not have enough liability, you can rollover the credits into future years, as long as the solar tax credit remains in effect.
Why Should You Act Now?
With the solar panel tax credit, you could save thousands of dollars on the cost of a solar system when compared with waiting a year and losing out on the chance for the incentive. In addition, switching to solar comes with many benefits. The costs of energy are lower, and you become less dependent on the power grid.
In addition, to qualify for the tax credit, your system must be installed by December 31, 2021. If you install it after that date, the percentage you get in tax credits will be smaller. Keep in mind, too, that installing a system can take some time.
If you decide later in the year you want solar power, you may not have enough time to start the installation. In addition, other homeowners and business owners may be working to get their own panels and systems installed and it may be more difficult to find someone able to take on the work.
If you are ready to go solar and save money, contact us at KC Green Energy to talk about solar panel installation. We are a leader in the installation and design of solar electric energy systems. Started in 2008 as a division of the family-owned Kautz Construction, KC Green Energy is made up of experts dedicated to solar energy. We have accredited project engineers who will conduct a free site analysis at your property so we can custom design a system that’s best suited for you.
More Information on the ITC
Congress approved the 2016 federal spending bill, which expanded on the solar panel Federal Investment Tax Credit (ITC), in 2015. It’s a five-year solar tax credit extension aimed at making panels affordable for all Americans. The bill applies to both commercial and residential systems, doesn’t have a cap value, and makes tax credits available to homeowners until 2021. Businesses will continue to receive the ITC after 2021 but it drops to 10%.
Presently the ITC is 26% until 2020. The ITC decreases each year starting in 2021 when it drops to 22%. Thereafter, the ITC drops to 10% for commercial property owners and is no longer available for residential homeowners.
Because the ITC not only loses value throughout the years but also ends, it’s imperative to invest in solar panels now! Anyone who owns a solar panel system is eligible for a tax credit, and you can rollover your remaining credits if you don’t have enough tax liability this year.
Items You Need to Claim Your Federal Solar Tax Credit
To start, you will need your solar installation receipts, along with the IRS 1040 and 5695 forms. Fill out the 1040 paper as usual, but stop at line 53 and move to form 5695. With the 5695 form, enter the cost of installation in line one. Any price related to installation is money you can claim! Reference the step-by-step process on how to file taxes to get a general idea of what to do.
If you want to update panels you installed years ago, you can still receive tax credits. You can claim the tax credit for each new cost related to the addition and won’t have to pay it back to the government if you sell the house. It’s possible to install solar panels and sell your building at any time — yet, this is only true for residential owners, as it’s a more complicated process for commercial installations.
Contact the KC Green Energy Team About Installing or Updating Your Solar Panels
The KC Green Energy team specializes in the design and installation of solar electric energy systems. We custom-design each system to suit your needs and maximize your ROI. As a family-owned operation, who also specializes in roofs, you can trust us to focus on quality craftsmanship. Contact us for a free site analysis or to learn more about our services today!