Faq
What are solar tax credits, and how do they work?
Solar tax credits are financial incentives offered by the federal government to encourage the adoption of renewable energy, including solar power. The most common solar tax credit is the Investment Tax Credit (ITC), which provides a credit equal to a percentage of the total cost of a solar energy system. In 2021, the ITC provides a credit equal to 26% of the total cost of a solar energy system.
Who is eligible for solar tax credits?
Any individual or business that installs a solar energy system is eligible for solar tax credits. However, the tax credits are subject to certain limitations and qualifications. For example, the solar energy system must be installed on a property owned by the taxpayer, and it must be used to generate electricity for the property.
How much can consumers save with solar tax credits?
Consumers can save a significant amount of money with solar tax credits. For example, a homeowner who installs a $20,000 solar energy system in 2021 would be eligible for a tax credit of $5,200 (26% of the total cost). This tax credit can be used to offset federal income taxes owed in the year the system is installed.
Are solar tax credits refundable?
The ITC is not refundable, but any unused credits can be carried forward to future tax years. For example, if a homeowner installs a solar energy system in 2021 and is eligible for a $5,200 tax credit but only owes $4,000 in federal income taxes for that year, the remaining $1,200 can be carried forward and applied to future tax years.
When do solar tax credits expire?
The ITC is set to expire at the end of 2023, after which the credit will decrease to 22% for commercial systems and 10% for residential systems. Therefore, to take full advantage of solar tax credits, consumers should consider installing solar energy systems before the end of 2023.
