You can lower your total energy expenses with the help of the federal solar tax credit. It shows you how much you can save from your solar system during its lifetime. Though it may seem a pricey investment, you’ll realize you can save more by using a solar system than paying for electricity over time.
How Much Can You Save from the Federal Solar Tax Credit?
It’s 30% of the money spent on the system. This also applies to the expenses of the parts and contractors. People who spend $10,000 on their solar system can get $3,000 worth of credits.
But, you need to be the owner of the system. So, this doesn’t apply to those who lease. The owner gets the credit even if they aren’t the ones who use it. If you solar lease, you can still see the benefits on your bills even though you don’t get to enjoy this incentive. This will have a great impact on the ROI of installing a solar system.
Because credit has great benefits, it’s best to get a solar system even if you don’t have enough budget yet to have it installed.
How to Compute the Federal Solar Tax Credit
It’s simple to calculate how much solar tax credit you can get:
The gross cost of the project x 0.30 = tax credit value
For instance, you can get a tax credit of $9,000 if you spent $30,000 on your solar project. The gross may include improvements to complete the solar installation such as electrical box upgrades. It’s best to consult a tax advisor for special situations.
There is a dollar-for-dollar income tax reduction for the credit. So, you can use the credit to pay the tax you owe. You can also pay and file your taxes in the same year to get the credit.
How to Get Your Federal Solar Tax Credit
You’ll need to register an IRS Form 5695 for the tax year your solar project will begin to operate to get your solar tax credit. For instance, if your city inspector approves your solar panels on September 15, 2024, you can get your credit when you file your 2023 taxes which is likely in the first months of 2024.
If you’re not familiar with the basic process of tax filing for the federal solar tax credit, it’s best to talk to a professional so that you won’t miss anything and waste your time.