22/10/2019 by David Kloepping
Let’s Talk About Tax Credits on New Installs
Did you know that businesses and homeowners are entitled to a federal tax credit with the purchase of a solar system? This tax credit program was established in 2005 by the Environmental Protection Agency and was intended to last until 2007. However, due to the overwhelming popularity of this program it has since been extended by over a decade. Currently there is a 30% tax credit available at the federal level for the purchase of a new solar system.
What does that mean to you?
Well… it basically means you’re able to deduct 30% of the entire solar system cost on your taxes. Thus if you were to purchase a solar system for $10,000 you’d be entitled to a $3000 tax credit. Or a $30,000 deduction on a $100,000 system purchase. And so on. The sun is the limit.
What do you mean by system cost?
This tax credit can effectively be applied to the entire ‘project’. We’re talking about: equipment costs, consulting fees, freight shipping costs, installer fees, tools and equipment, engineer fees, electrician fees, wiring (and other general materials), permitting service costs, and permitting fees. The whole shebang, if you will.
How can you claim the credit?
Surprisingly, quite easily. You complete IRS form 5965 (https://www.irs.gov/pub/irs-pdf/f5695.pdf). Be sure to add the credit to form 1040 (https://www.irs.gov/pub/irs-pdf/f1040.pdf) And wha la! You’ve filed out all necessary forms to claim your credit. Be sure to save your receipt and check with your tax preparer to ensure that you’ve dotted your T’s and crossed your I’s. This is why I’m not an accountant. Or an English professor!
Should I hold off on getting a system until next year?
We wouldn’t recommend it! Currently the tax credit is sitting at 30%. Once 2020 rolls around it reduces to 26%. And in 2021? It drops to 22%! The following year, in 2022 the tax credit is only at 10% for commercial and utility scale projects only. Meaning the residential tax credit expires in just 2 years!
So… what are you waiting for?
This 30 % tax credit keeps getting extended, but it won’t be around forever. Jump on yours today. It’s time to have Uncle Sam make your energy providers scream ‘Uncle’. Don’t watch your tax credit dwindle away. Rather, watch your savings accumulate in one of the safest, cleanest, investments possible. Solar is the future, and there’s never been a better time to invest than the here and now.