‘Tis the season for taking advantage of the biggest federal tax credit for a new solar panel system. Yes, it’s decreasing at the end of 2019. But there are still plenty of savings to be had in 2020. Here’s what you need to know.
The federal tax credit is still available next year. It’s just not quite as substantial. In other words, you’ll get a 26 percent tax credit for your purchase, as opposed to the 30 percent that’s available through 2019. In 2021, this percentage drops to 22 percent. After 2021, only owners of a home-based business can get any credit, and that’s just a mere 10 percent business tax credit for a new system.
So, there is definitely a sense of urgency if you’re still sitting on the proverbial fence when it comes to installing a home solar system. The Residential Renewable Energy Tax Credit is a clear and understandable way to save significantly on the cost of installing solar panels. For example, an average-sized home with about 400 square feet of installed panels can save several thousand in tax breaks.
Getting the Tax Credit
With the Renewable Energy Credit, taxpayers only need to subtract the credit amount from their total tax owed. There is no limit on the price of the solar system installation. This is different from a tax deduction which reduces the amount of income tax you pay taxes on. So, a $100 credit is worth $100 and isn’t impacted by your specific tax rate. If you can’t use all of the credit in a single year, you can carry it over for later years.
- The entire bill for the system minus the sales tax. This includes the panels, labor costs, assembly, installation and wiring.
- The system can be bought outright or financed with a loan
- The installation must be for a home that you live in for at least part of the year.
To qualify for the tax credit, you will need the following:
The credit isn’t applicable for new construction or for income properties. It’s also not for leased systems, or if the system will be used to heat a pool or hot tub.
Want to learn more about the tax savings on a home solar system? Contact the experts at Cool Blew Solar today at 623-234-2836.