Residential Solar has been booming for years as more and more homeowners think about saving money on their electricity bill and also being more conscious of the impact that they have on the environment. With solar, there are immediate benefits in the form of the ability to product your own energy instead of buying energy from the utility company. There are also some delayed benefits which come in the form of federal tax credits.
This tax credit is the biggest incentive offered to homeowners looking to go solar in the next 10 years. The tax credit, also known as the investment tax credit or ITC is a 30 percent tax credit claimed by individuals who purchase a solar energy system or a standalone energy storage system for their home.(under Section 25D of the tax code). The best news about this credit is that it does not employ a value cap, meaning whatever money you spent on that solar energy system will still be eligible for a tax credit. ITC was enacted in 2006, the U.S. solar industry has grown by more than 200x - creating hundreds of thousands of jobs and investing billions of dollars in the U.S. economy in the process. If a homeowner buys a newly built home with solar and owns the system outright, the homeowner is eligible for the ITC the year that they move into the house. Credits can only reduce your taxes and are not refundable. But any unused credits can be used in later years. To claim the residential credit, use Form 5695 to claim the residential tax credit when you file your taxes.
Importantly, the ITC can now benefit everyone, not only those that have tax liability. Nonprofits and other tax-exempt entities – like municipalities and Tribal governments – are eligible to receive the ITC in the form of a direct pay reimbursement.
Qualifying for the tax credit is pretty straightforward, as long as you own and have installed a solar energy system for your home or business you are eligible for the tax credit. It’s important to note that if you plan on using this tax credit that you need to take ownership of your solar system. If you are leasing or financing the system in some way then, unfortunately, you cannot take full advantage of the tax credit. When working to make use of this credit with your tax professional make sure that you have saved all of the pertinent documents relating to the install.
If you are confused about federal regulations and some of the above information didn’t make sense, there is absolutely no need to worry. Our team here at Triton Solar’s main priority is for you to be excited about the future of solar energy for your home. Schedule a consultation today for an in-depth analysis of your property to properly design a system for your energy needs.