Federal Solar Tax Credit Extension

Is It Too Late To Get A Solar Energy Tax Credit?

February 14, 2022

When Congress okayed the nation’s spending bill for 2016, they included a five-year solar tax credit extension. It’s unclear what President-elect Trump’s policy will be towards these types of tax credits, but it would take an act of Congress to change what is already in place. That’s great news for homeowners, as well as for solar energy companies. Even if a future administration brings back cheap coal, solar tax credits will help keep alternative energy affordable for more Americans.

What does the solar tax credit mean?
The tax credit will show up on your tax forms as “investment tax credit.” The ITC lets you deduct 30% from your federal taxes of the installation cost of a solar energy system. The tax credit can be used for either residential or commercial systems, with no limit on the price tag.

Here is an excerpt from a Nerdwallet.com article, summarizing the timeline for the solar tax credit:

The U.S. Department of Energy says the tax savings on an average solar installation can reach $7,500.

The actual percentage of the cost you can claim varies based on the year your system was activated:

System in service

Credit amount

2017-2019.

30%.

2020-2021.

26%.

2022-2032.

30%.

2033.

26%.

2034.

22%.

 

To read the complete article please go to nerdwallet.com.

In case you’re wondering whether you qualify for this tax benefit, all you have to do to be eligible is to own a solar energy system. Leasing doesn’t count. Please don’t rely on the information presented here, however. As with all tax matters you should consult with a CPA or other tax professional.

Who Should Take Advantage of the Tax Credit?

Here’s an overview of the individuals who are best suited to benefit from the Federal Tax Credit for solar energy:

  • Homeowners with Sufficient Tax Liability:

  • The Federal Tax Credit for solar energy is particularly advantageous for homeowners who have a sufficient tax liability. Since this credit reduces the amount of tax owed, dollar-for-dollar, individuals who have a significant taxable income can maximize the benefit. The more tax you owe, the more you can offset with this credit, making it ideal for those in higher tax brackets.
  • Residents in Sunny Regions:

  • People living in areas with high solar potential, such as states with abundant sunshine, stand to gain the most. The effectiveness of solar panels is directly related to the amount of sunlight they receive. Therefore, residents of sunnier states can produce more solar energy, leading to higher savings on their energy bills and a quicker return on their investment in solar technology.
  • Eco-Conscious Individuals:

  • The tax credit also appeals to individuals who are environmentally conscious and seeking to reduce their carbon footprint. By investing in solar energy, these people not only benefit financially but also contribute positively to the environment by using a clean, renewable energy source. This aligns well with the values and goals of those who prioritize sustainability.
  • Long-Term Property Owners:

  • Individuals who plan to stay in their current home for an extended period are prime candidates for solar energy systems. The initial investment in solar panels can be substantial, but the long-term savings on energy costs and the tax credit can make it a wise financial decision for those who are in their homes long enough to reap these benefits.

Conclusion

The Federal Solar Tax Credit offers a unique opportunity for a diverse range of individuals, particularly those who are financially stable, live in sunny climates, are environmentally conscious, and have long-term housing plans. It’s a powerful incentive for adopting renewable energy and reducing reliance on traditional power sources.

 

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