March 7, 2017

Solar Tax Credit

Save Energy and Money with the Solar Tax Credit

Are you considering becoming more “green”? The Solar Tax Credit may incentivize you to do so while saving the “green” in your wallet. There are significant tax savings opportunities available for those who wish to install residential solar panel systems. Congress has extended the federal tax credit for installing solar-electric and solar water-heating technologies through tax year 2021. Please note, however, that federal benefits will begin to phase out after tax year 2019.

What is a tax credit?

A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. For example, claiming a $1,000 federal tax credit reduces your federal income tax liability by $1,000.

How much can I save?

Through 2019, the Federal Solar Tax Credit will reduce your tax liability up to 30% of the cost of solar technology equipment and installation. Installation costs include labor costs for on-site preparation, assembly/installation expenses, and piping/wiring needed for integrating solar-electric or solar water-heating systems with a home. The credit will be available at reduced rates after 2019 through 2021.  There is no dollar limit on this credit and any unused portion can be carried forward to the following year.

Credit Phase-out Schedule

  • 30% credit for systems placed in service by 12/31/2019
  • 26% credit for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% credit for systems placed in service after 12/31/2020 and before 01/01/2022

What are the limitations of the credit?

The home served by the system does not have to be the taxpayer’s principal residence. However, the credit cannot generally be used for improvements made to investment property.

Additional requirements exist for solar water-heating property:

  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.

Does the credit apply to solar property that is leased?

You must own your solar energy system, rather than lease, to be eligible for the credit

Can the credit be used to offset the Alternative Minimum Tax (AMT)?

Yes, the credit can be used to offset AMT without limitation in the year placed in service.

How can I claim my credit?

Simply provide the receipts for your equipment and installation costs to your team at Realize and we will take care of the rest!  For more information about eligibility and filing requirements, please feel free to contact our office.