Today, a majority of people worldwide looking for an affordable yet eco-friendly option to power their homes. Solar panels, therefore, have become increasingly popular among homeowners as well as corporate executives. They offer a cost-effective and reliable energy solution.
By using solar energy, you don’t only help reduce the generation of carbon pollutants, but also acquire full-on energy independence. By installing solar panels, you can go completely off-grid and won’t have to rely on traditional energy sources.
While solar energy is certainly the future of energy production, many people still believe that it’s an expensive option. The reality, however, is quite the opposite. Once you overcome the initial solar panel installation costs, they won’t have to worry about the massive security bills or costly maintenance.
Federal Solar Tax Credit
By installing a solar panel, homeowners can earn a federal tax credit. That is to say, you acquire a credit for your income taxes that reduces your tax bills.
The term federal residential solar energy credit is used to refer to a tax credit that you can claim on federal income taxes for a percentage of the overall cost of a PV system. That’s only possible if the system is placed in service during the tax year.
In 2006, the federal government ratified the solar Investment Tax Credit (ITC), because of which the country’s solar industry has grown by over 10,000% with an average yearly growth of 50% during the past decade.
Congress approved an extension of the ITC in December 2020, because of which, you can get 26% tax credit for the PV systems installed during 2020 and 2022 and 22% for the PV systems set up in 2023. The tax credit is expected to expire in 2024 unless renewed by Congress.
Following expenses are included in the plan.
- PV cells or solar panels are used to power an attic fan. (the fan itself is not included)
- Costs involved in onsite preparation, contractor labor costs, installation and assembling costs, inspection costs, permitting fee, and developer fee.
- Balance-of-system tools such as inverters, wires, and mounting equipment.
- Electricity storage devices that are charged with solar PV systems.
- Taxes related to sales on eligible expenses.
Solar Tax Credit Eligibility
The year you install a solar panel, you can qualify for ITC, but your system must generate electricity for a residential home in the US.
Here are the eligibility criteria:
- You own the solar panel system outright and don’t have it on lease.
- The PV system was installed between January 1, 2006, and December 31, 2023.
- The solar panel system is located in the US.
- The system is either located in a primary or secondary US residence or you’re installing it for an offsite solar project and is less than your home’s energy consumption. A taxpayer can claim a section 25D tax credit if they purchase a portion of a community solar project.
- The PV system is newly installed or is being used for the 1st time. You can only claim a credit on the original installation of the system.
State Government Rebates
Some US states also offer upfront rebates to people installing solar power systems. These rebates are typically available for shorter durations, so it’s best if your search rebates in your state, acquire an incentive before it expires. With a state government rebate, you can minimize your solar costs by 10% to 20%.
Rebated from state governments don’t affect your federal tax credit. If, for instance, your PV system was installed before December 31, 2022, installation costs equaled$17,000, and your state government provided you a single time rebate of $1,000 for system installation, your federal tax credit can be calculated as;
0.26 * $17000 = $4420
Renewable Energy Certificates
When you receive renewable energy certificates from another buyer or your utility, the payment is regarded as taxable income. In this case, the payment may increase you’re your gross income but it won’t reduce the federal solar tax credit.
Planning to Switch to Solar?
Looking for a reliable company for solar panel installation at your home? Need help understanding how the system works and installation costs involved in the process? Before installing a solar panel, make sure you are acquiring services from an established and trusted company.
All Solar Energy Solutions, LLC offers premium quality, reliable solar panel solutions in Portland, ME, at affordable prices. If you’re looking for experts to help you with solar panel installation or generator installation, you can trust their services.
Feel free to reach out to their solar panel contractors for all your queries regarding solar technology.