Residential solar solutions deliver predictable cost savings to homeowners that’ll keep giving for multiple decades. Although the total cost savings would far exceed their home solar system, the upfront investment can often discourage some homeowners from choosing home solar. Therefore, the federal government offers a Federal Solar Tax Credit (ITC) incentive to effectively reduce the upfront investment made by solar buyers.
Until recently, the solar tax credit was reduced to 26% of the solar system’s value, and was scheduled to be phased out in 2024. In a surprising turn of events, through the Inflation Reduction Act, the federal government increased it to 30% again, and have extended it through 2032.
With this singular decision, home solar buyers can save an additional 4% on their purchase. Here’s what Edison, NJ residents should know about this incentive.
Here are some of the conditions you must qualify to be eligible for the federal solar tax credit:
- You should own the PV system, whether you paid for it in cash or through financing
- This should be the first installation of the PV system. Previously installed systems do not qualify for the tax credit
- The PV system should be installed on your residential property.
- The PV system should be installed the same year for which you are claiming the tax credit – this is great news for those installed already in 2022. Homeowners already installed this year were expecting the 26% and now can expect a 4% windfall off the cost of their solar installation.
All equipment directly related to the PV system, including labor, solar panels, inverters, racking, wiring, and meters, qualify for the tax credit. All equipment related to battery storage, with or without attachment to solar panels.
Also, preparations essential for installation, such as minor repairs on the roof, may also qualify for tax credit, depending on your unique context. Please contact your accountant for better clarity on this.
However, you should know that ITC is a tax credit, not a cash discount. So, you can take full advantage of the rebate only if your annual income tax liability is big enough. You can understand this better with an example. Suppose you install a PV system worth $20,000. You’d qualify to get 30% of $20,000, which is $6,000, in rebate. As long as your annual income tax liability is more than $6,000, you can enjoy the full rebate. If it’s less, say, $5,000, for instance. Then you can get a rebate for only $5,000, although your PV system would be eligible for a rebate of $6,000.
How To Apply:
When filing for taxes in a within a taxable year, you will include form 5695 – (link the form)- https://www.irs.gov/pub/irs-pdf/f5695.pdf and under item #1 you are to list your total eligible solar costs for the year. Be sure to confirm with your installer, but in most cases, this will be your total solar contract price. Or simply provide your solar contract and form 5695 it your accountant to be submitted with your tax documents to be filed within your tax return.
Green Power Energy is not a financial services company, please check with your account on your eligibility for the tax credit. Need more information on Federal Ttax Credit (ITC) and how it can benefit you? Give usa call at (844) 584-0008.