M-F 9am-5pm PST
M-F 9am-5pm PST
That’s it, they made it Easy!
In December 2020, the US Congress extended the solar tax credit, providing a 26% tax credit for solar systems installed in residential homes before the end of 2022...
However, as part of the new Inflation Reduction Act of 2022, the tax credit has been extended, as well as increased! The extended tax credit has also been renamed the Residential Clean Energy Credit.
Where the previous 26% tax credit was due to expire at the end of 2022, it has now been extended until 2034 and the credit amount has been increased to 30%!
This update and extension is a welcome surprise for all tax-paying clean energy enthusiasts, as well as the entire solar movement!
Put simply, for every $1,000 you spend on your solar system, you may be eligible to receive a $300 federal tax credit on your annual tax return...
The newly renamed 10-year extension to the previous Solar Tax Credit means those that install a new solar energy system between 2022 and 2032 will receive a federal government tax credit of 30% of the cost of your installed solar power equipment.
As a tax credit, it will be rewarded as a reduction in the amount of tax an individual will owe at the end of the year.
As mentioned, the bill calls for an initial 10-year extension of the tax credit at 30%. After this, it will drop down to a 26% credit in 2033, then a 22% credit in 2034.
In other words, you have 10 years to take advantage of the 30% credit, then the credit is set to phase out at decreasing percentages.
How much you save depends on the overall cost of your system. To do the math, take your total (estimated) costs and multiply it by 0.30 and this will show your savings. For example, if it's going to cost you $15,000 for all the solar equipment, $15,000 x 0.30 = $4,500. So, you would get a $4,500 reduction from what you owe in federal taxes!
It's really pretty simple. You claim the investment tax credit when you file your taxes at the end of the year. Let your accountant know you've gone solar, or if you do your own taxes, you'll need to fill out the IRS Form 5695.
You may be eligible for the federal tax credit if you meet the following criteria:
The solar tax credit decreases every year. For example, people who installed a solar system before 2019 were eligible for a 30% tax credit. In 2022, it dropped to 26%, already scheduled to drop to 22% in 2023, and currently set to expire in 2024, unless renewed by Congress....
*Disclaimer: This is NOT tax advice. Please consult your local accountant or lawyer for more advice and direction, but this post covers everything you need to know when it comes to the federal solar tax credit and getting a simple 26% credit towards your taxes and solar power system!
If you have more questions about what solar kit makes the most sense for your needs, feel free to reach out to us today and we'd be happy to help!