Did you know a solar energy system not only saves you money on your electric bills, but can also save you thousands of dollars on your taxes? As a continuing incentive for Americans to ‘go green,’ the federal government’s Inflation Reduction Act allows homeowners to get a tax credit equal to 30 percent of the cost to install solar panels, including the cost of equipment, labor, permitting fees, inspections, and sales tax. The tax credit went into effect in August 2022 and applies to solar systems installed before 2033.
To be eligible for the tax credit, you must own (not lease) the solar panels, they must be installed at your primary or secondary residence, and you must also have a taxable income. Here is a real-life example: the Jones family decides to install solar panels in 2023 on their primary residence, and the total cost with labor, equipment, and fees is $25,000. When they file their taxes for 2023, they would receive a tax credit of $7,500, a dollar-for-dollar reduction of the income tax they owe. If they owed $10,000 in federal income taxes, they would only have to pay Uncle Sam $2,500. If their taxes were less than $7,500, the Joneses would be able to carry over what remains of the credit to 2024. The tax credit can be carried forward for up to 5 years.
Next year, homeowners who purchase standalone battery installations will also be eligible for the 30 percent credit. However, starting in 2033, the federal tax credit goes down to 26 percent for solar installations, in 2034 it is 22 percent, and it expires in 2035. But even though the 30 percent tax credit is good for the next ten years, there’s no reason to delay a solar installation. Homeowners start saving money on electricity costs from the first day their solar panels are installed, and the savings can be significant, especially since electricity rates have been rising steadily in many states.
Besides the federal tax incentive, homeowners may also qualify for utility and state incentives or rebates. In some cases, utility rebates can’t be stacked and may reduce the federal tax credit, but some state government incentives may not need to be deducted before calculating the federal tax credit. The time is now to take full advantage of incentives to go solar and start saving your hard-earned cash! Call iSP today 866-582-0000.