If you are a homeowner or business owner who wishes to switch to solar, there is no better time to leverage government incentives like the federal solar tax credit. This is the most beneficial incentive you can claim this year because it offers thousands of dollars worth of savings in the form of tax credit, and there is no cap on how much you can claim. In this article, we’ll take you through the frequently asked questions about solar ITC.
What Is the Solar ITC?
The federal solar investment tax credit (ITC) is a 30% tax credit for solar system installation in residential and commercial properties. This dollar-for-dollar reduction can be applied to personal income taxes to save money on solar.
What Expenses Does It Cover?
The solar investment tax credit covers various expenses associated with installing solar power systems, such as
- Installation costs, including equipment rental and labor
- Energy storage system costs
- Necessary government permits and inspections
- Tools needed for installation, such as wiring and racking systems
- Structural upgrade costs
Who Is Eligible for the Solar ITC?
You are eligible for the solar ITC if:
- You had your solar PV system installed between January 1, 2017, and December 31, 2034
- Your solar PV system is located in your United States residence
- You are either the owner of the solar PV system or you bought an interest in an off-site community solar project
- Your solar system is brand new or is being used for the first time
How Do You Claim the Solar ITC?
Follow these steps to claim your solar ITC this year:
- Ensure your property qualifies for the ITC
- Fill out the IRS form 5695 and key in your results on IRS Schedule 3
- Calculate the credit amount by multiplying your property’s cost basis by 30%
- Fill out the total cost of your project as evident in your solar contract
- If you are subject to an alternative minimum tax, reduce the credit
- Use the credit to deduct tax owed
How Does the Solar ITC Work?
The goal of solar ITC is to incentivize residential and commercial clients to switch to solar. You can claim this credit through your federal income tax. It reduces how much you owe on your taxes for the year you claim it. Currently, you can claim up to 30% of the total installation cost of your solar system.
Can You Claim the Solar ITC Multiple Times?
No. You can claim solar tax credits only once per solar/battery installation on a qualified property in the year the system becomes operational. That said, you can claim solar ITC for more than one installation if they are on different properties.
Can You Claim the Solar ITC on Your Rental Property?
The solar ITC does not apply to installing solar power in your rental property. However, you can claim the credits if you live on the property for several months of the year and rent it while you are away.
Claim Your Solar Tax Credits With Solar Optimum
If you’ve been contemplating going solar, there’s no better time than now. The federal tax credit and other government benefits have made it easier for business people and homeowners to invest in solar. Contact us to learn more about other solar financing options available, or download our Solar Federal Tax Credit white paper.
