U.S. President Joe Biden and his administration have solar energy at the top of their agenda. They see solar power as a critical part of combating climate change. They’re looking to solar panel companies to help them meet their goal of generating 100 percent of the electricity in the United States from clean sources by 2034.
One of the main ways the Biden administration intends to incentivize solar panel installation is through the solar energy tax credit. The solar energy tax credit allows solar panel users, especially individuals, to claim a tax credit for 30% of the installation cost. The solar panel company industry strongly supports this policy, as it has been a significant driver of solar panel installations in recent years.
However, one big problem with the solar energy tax credit is a misconception about how it works. Some of the things you may encounter include the following:
Myth #1: The Solar Energy Tax Credit Program offers a refund through a check.
Sadly, some solar panel companies try to scam people by pretending the incentive program is a rebate. They do this knowing it’ll make solar appear as if it’s free.
Even though solar energy tax credits are non-refundable, they’re still worth pursuing. The credit allows you to lower your taxes owed on your federal income taxes. This credit version requires a solar system that provides electricity for a U.S. residence and is operational to qualify.
Tip: Make sure to ask your preferred solar installation company the following questions to shed correct information:
- How does the federal tax credit work?
- How will this incentive affect the quotation for solar panel installation?
- What is the process for claiming the credit on my taxes?
Myth #2: The Federal Solar Tax Credit can benefit everyone.
A federal solar tax credit, known as the Investment Tax Credit (ITC), cuts down your taxes by 30% on solar panel installations. The ITC is a dollar-for-dollar reduction against your federal income tax liability, making it one of the most valuable incentives for going solar.
Again, this incredible opportunity is available for filings with tax liability. A deduction from the taxes owed by business owners or an individual equal to 30% can apply directly to the tax basis. In this case, it would include the costs of solar paneling, installation, racking, circuit breakers, and energy storage devices, as well as sales & use taxes associated with the equipment. Sadly, if there is a refund for that specific year during filing season, you cannot use this credit then, but it will automatically carry over to next year’s return instead.
Tip: Speak to your accountant or legal counsel to learn if you qualify for the 30% federal tax credit. If you do, take advantage of this fantastic opportunity while it’s still available and get started with your solar panel installation today!
Myth #3: Solar Energy Tax Credit is only for those newly installed solar panels after it has passed.
From January 1, 2006, to December 31, 2023, your solar panel must be new or used for the first time. Moreover, other requirements include:
- You must own the system outright (not leased)
- It must reside in the United States.
- You must install the system at your primary or secondary U.S. residence or put it on an off-site community solar project.
Fact: There is no need to submit documentation with your tax return to claim the credit. Instead, keep the necessary documentation as part of your records to prove eligibility if the IRS audits you.
Suppose you are interested in going solar and taking advantage of the solar energy tax credit. Research and choose a reputable solar panel company like Solaria Energy Solutions that can help you navigate the process. With the correct information and expert guidance, taking advantage of this valuable incentive is easier than ever!