Switching to solar energy for your home or business is a great way to reduce your carbon footprint and help the planet, but it’s also a great way to save money – and not just because you’ll be slashing your electric bill. Right now, if you install a solar energy system, you can claim a credit of 26% of the expense of a residential or commercial solar panel system on your federal taxes. That’s a huge saving for anyone! But the time to act is now: the federal tax credit for solar panels will decrease in 2023 to 22%. So this tax season, let’s talk about how exactly you can get this money back when you switch to solar.
The Solar Investment Tax Credit
The solar investment tax credit, also known as the federal solar tax credit, has been one of the most successful federal incentives encouraging people to go solar. This tax credit helps offset the initial cost of installing solar panels on your home or business, allowing you to claim 26% of the total cost of your system back on your federal taxes. So, for example, if you were given a quote of $20,000 for a solar panel system, you would save around $5,200 on your federal taxes. Not only that, but the tax credit will roll over year after year.
Keep All Your Paperwork
To get the full benefit of your solar panel system on your taxes, you should keep track of everything that you spend on the system. Keep the paperwork for everything, including:
- The cost of your solar equipment
- Solar consulting fees
- Professional installer fees
- Labor costs for the solar installation, including electricians’ fees and engineers’ fees
- Wiring, screws, bolts, nails, and other necessary hardware
- Energy storage devices that are powered through the solar panels, including solar batteries
- Permitting fees
- Permitting service costs
- Contractors’ fees
When Filing For The Tax Credit
When it comes time to actually file your solar tax credit, you will need to file form 5695 with your 1040 individual tax return. If you have a commercial solar energy system, you will need to complete form 3468. You will need to:
- Gather all of your receipts.
- Calculate the credit on Part 1 of the form: on line 1, enter your overall costs, then complete the calculations on lines 6a and 6b.
- If solar is your only renewable energy addition, and you don’t have any rollover credit from the previous year, skip down to line 13.
- On line 14, calculate any tax liability limitations using the Residential Energy Efficient Property Credit Limit Worksheet, which you can find online. Then, complete calculations on lines 15 and 16.
- Be sure to enter the figure from line 15 on your Form 1040, line 5.
It is important to note that as the years go by, the federal solar tax credit will keep decreasing. By the year 2024, it is projected that there will only be a 10% tax credit for commercial installations, and 0% for residential. So if you are interested in getting a solar panel system, it’s better to do it sooner rather than later- you don’t want to miss out on these tax credits!
If you are considering going solar, come to Go Solar Energy. We will provide you with the best service and all the information you need, for free. Working with a trusted company like Go Solar Energy will not only help you get the most efficient solar panels, but will also help you save thousands of dollars, since our agents work with the top-rated solar companies in the nation. That means we can compare all available plans and find the right one for your needs. We will go over all of the tax exemptions in your state and make sure to save you as much money as possible. To get free instant quotes, simply enter your zip code in the bar on our home page, or to speak with one of our licensed agents, call 888-290-3112.