If you’ve ever thought of going solar, now is the time. 2016 may the last year the U.S. federal government will offer tax credits for residential solar programs. Here’s what homeowners need to know.
The solar tax credit, also known as the Solar Investment Tax Credit (ITC), is a government-sponsored tax credit for residential solar-powered systems. Under the federal solar tax credit, homeowners with solar panels installed before December 31, 2016 can claim 30% of the cost as a tax credit, with no ceiling.
The solar tax credit takes the cost of installation directly off your annual tax payment, rather than deducting it from your taxable income. For example, if your system cost $10,000, you could claim $3,000. However, if you’re also claiming any state discounts or utility rebates, the IRS requires you calculate any other rebates first (net system cost).
Be advised: if your tax bill is less than the credit you receive from the solar tax credit, the government won’t send you a check for the difference. However, they do allow you to rollover the credit and apply it to next year’s tax bill.
The 2016 deadline is nearly here. What are you waiting for? Get free, personalized solar quotes from expert installers now.
To be approved for the solar tax credit, solar systems must be placed in service on or before December 31, 2016. The key word here is in service. Construction must be complete, the solar system must function, and you must own the system. It doesn’t matter where the solar panels are installed, as long as they are on your property.
If you install solar panels on a newly constructed home, you must live in the house by December 31, 2016 to qualify for the solar tax credit. If you purchase a new house constructed in November 2016 with solar power already installed, but don’t move in until January 2017, you do not qualify. (If you do qualify for a new house install, make sure you ask the builder if he already claimed the federal solar tax credit for the residence during construction.)
Homeowners leasing a solar system or participating in a solar power purchase agreement (solar PPA) do not qualify for the federal solar tax credit. You must own the system outright to qualify.
If you want to add new panels to an existing solar system, you are allowed to claim any costs with the new installation under the federal solar tax credit.
Two main types of solar energy qualify for the credit.
According to Energy.gov, “Expenditures include labor costs for onsite preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home” can be calculated into your total solar costs.
To calculate your total, add up the cost of solar panels, installation equipment, and labor costs.
In a nutshell, the solar tax credit will expire on January 1, 2017 unless Congress renews it.
The federal solar tax credit deadline has been extended several times. Originally the Energy Policy Act of 2005, ITC has been rolled into The Energy Improvement and Extension Act of 2008 and The American Recovery and Reinvestment Act of 2009. After December 31, 2016, it will expire, unless Congress extends the deadline.
If you want to help make a difference in the future of solar, join the solar power advocacy network, or ask your congressman to support the extension of the solar tax credit.
At the time of this post, the deadline to submit for the solar tax credit is December 31, 2016. Any solar system installed after that date does not qualify. Many industries, including environmental organizations, are joining the solar energy industry in lobbying to extend the credit for five more years. Ultimately, it’s up to Congress to decide if and how long the deadline is extended.
According to Bloomberg New Energy Finance, if the ITC is extended for just five more years, 76 GW of new solar power would be built across America between 2016 and 2022. As more GW of solar power is available, solar companies are forced to innovate and decrease installation costs to compete in a successful market.
If the deadline is not extended, 2016 will be the last year to receive significant government incentives for going solar. Get comparative quotes to see how much you could save by going solar.
When submitting your taxes file IRS Form 5695, also known as the residential energy credit form. To complete the form, you will need to know a few details about your solar system including the qualified solar electric property costs, solar water heating property costs, and your property’s kilowatt capacity.
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