FEDERAL TAX CREDITS for RESIDENTIAL and COMMERCIAL SOLAR INSTALLATIONS: SAVE UP TO 30%
The Consolidated Appropriations Act, signed in December 2015, extended the expiration date for solar, wind and geothermal electric systems and introduced a gradual step down in the credit value for this technology. Combined with state rebates and low component prices the savings can be even greater.
The current credit allows taxpayers to potentially claim a credit of up to 30% of qualified expenditures (including labor) for a system that serves a home located in the United States that is owned and used as a residence, even part time, by the taxpayer.
Tax Credit Details: (Be sure to contact your accountant/tax advisor to see how these incentives affect you.)
• 30% federal tax credit on your tax return – Also called the Investment Tax Credit (ITC)
• Applies to solar water heating, small wind energy and geothermal heat pumps, as well
• Includes installation and labor costs
• Applies to both Residential and Commercial installations
• There is no cap on how much you can claim
• The credit drops to 26% for 2020, 22% for 2021 and then 10% for commercial installations in 2022 and 0 for residential
• Residential installations can claim the deduction as soon as the system is complete.
• Commercial installations can claim as soon as they start physical construction or have purchased over 5% of the final equipment costs. They must continue progress
but have until 12/31/23 to get it operational
• You must own your panels. Not valid if you lease panels or signed a Power Purchase Agreement (PPA)
• This is a credit, not refund, so you can’t get more back in a single year than you owe. The remainder of any credit will roll to next year’s taxes. Will rollover
as long as the credit is in effect.
• You need to fill out IRS Form 5695 before filing your taxes and include it with filing
• Includes cost of conduit or wiring to connect the system to the home or business
• For new home construction the “placed in service date” is the date of occupancy
• The system does not have to go on the homeowner’s primary residence but they must use it as a residence for at least part of the year. Credit is prorated
based on the percent of the year the homeowner lives there.
• The credit doesn’t apply to rental-only properties
• Stand-alone energy storage systems do not qualify but when coupled with PV they do.
• Keep your receipts for everything! Covered expenses include:
Solar consulting fees
Freight and shipping costs
Tools and equipment that were rented or purchased for the job (lifts, ladders, scaffolding, etc)
Consumables – nuts, bolts, screws, wire, etc
Professional installation fees
• For residential installations, the 30% deduction is applied AFTER deducting any state or utility rebates
• For commercial installations the 30% deduction is applied before any state/utility rebates but the credit is treated as earned income so tax must be paid on it
• Renters do not qualify for the credit if installing it on their residence
• The credit also applies to equipment added to pre-existing solar electric systems, such as a new battery bank
The federal tax credit for these systems varies depending on the date the system is placed into service.
• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service between 1/1/2020 and 12/31/2020
• 22% for systems placed in service between 1/1/2021 and 12/31/2021
Examples of how this works:
If your PV system is installed by 12/31/2019 and costs $9,000
& your tax liability for the year is $6,000
You would reduce your tax liability by $2,700 (30% credit) and only pay $3,300.
If your PV System is installed by 12/31/2019 and costs $6,000
& your tax liability for the year is $1,000
You would eliminate your tax liability for the year,
and have the option to carry the remaining credit over to the following year.
More information regarding the Energy Efficient Mortgage (EEM) program available for qualified veterans: Solar Savings for Veterans