10 FAQs About the Solar Tax Credit
One of the most common questions we get from our residential customers is whether they qualify for the federal tax credit for solar photovoltaics, also known as the solar tax credit. Here are ten of those questions. Do you have any that aren’t on the list?
1 – What type of equipment and expenses qualify for this credit ?
According to the United States Department of Energy, this credit includes:
- Solar photovoltaic panels or solar cells.
- Balance- of- system equipment, including wiring, inverters, and mounting equipment.
- Energy storage devices that are charged by the associated solar panels.
- Contractor costs to prep, assemble and install the solar system, including permits and fees.
- Sales taxes on eligible expenses
Note that traditional roofing materials and structural components do NOT apply, but solar roofing tiles and shingles MAY qualify.
2 – How much is the tax credit for ?
The credit is a one-time dollar-for-dollar reduction towards your federal taxes, meaning you have a net liability of zero dollars for every dollar spent on the credit. According to the IRS, applicable percentages are:
- Placed in service after December 31, 2016, and before January 1, 2020, 30%
- Placed in service after December 31, 2019, and before January 1, 2023, 26%
- Placed in service after December 31, 2022, and before January 1, 2024, 22%
As of now, the credit expires in 2024. If you’re thinking about going solar, now is the time to act. Installers may be backed up over the next year. If you’re thinking about DIY, it may take you some time to get your array placed into service.
3 – What does placed-into-service mean ?
Placed into service means whenever the installation of your project is complete. If the equipment is on your property but not installed, you do not yet qualify for the credit.
4 – Tell me about #2 again. Can I claim the solar pv tax credit more than once ?
Nope. You can claim the credit one time per residence.
5 – What if I have multiple homes ?
That’s different. According to this tax code, vacation home eligibility is based on whether the taxpayer uses as a residence a dwelling unit. You can’t count a home that you use only as a rental. If you have a home that you live in part time, and rent the rest of the year (such as an airbandb) you will reduce the credit to reflect the time you use it as a residence.
6 – What counts as a residence ?
The credit applies toward your primary or secondary U.S. residence. The panels must generate electricity at the location you claim it for, but are not required to be on a roof. Your equipment is also not required to be connected to the grid. But it certainly makes sense to do so.
7 – What counts as a qualified home ?
Co-op tenants and condo association members qualify for the amount they contribute toward a qualified system. Houseboats and mobile homes also qualify. Renters do not, because they do not own the system.
8 – Where can I find out about any other subsidies or rebates that I can take advantage of ?
Here is a breakdown by state.
9 – What if my tax liability is too small to claim the full credit ?
No fear there. The tax credit is non-refundable, meaning you can lower your liability to zero but not below zero. However, if you don’t have enough income to claim it, you can roll it over to the following year.
10 – How do I claim the solar tax credit?
File form 5695 as part of your tax return. Calculate the credit on Part 1 and enter the result on your 1040. Contact us if you have questions about the credit! We’re open 24/7 and we’ll be happy to clarify.