As more homeowners look for ways to reduce their utility costs, solar panels grow in popularity. Fortunately, the federal government and other state agencies offer tax credits and incentives to people who decide to make their homes energy-efficient by adding solar panels. Homeowners who want to benefit from the tax credits must follow specific criteria.
Check your local utility company and state government
Many state governments and local utilities companies offer solar incentives to people who install solar panels on their homes. These incentives are in addition to the federal tax credits, so your savings can multiply by doing some quick research and completing specific forms.
You might be able to receive rebates from your local utility company. In some states, you’ll receive payment for providing renewable energy to your local grid. Keep in mind that any income you receive from your solar panels is considered taxable, so talk to your tax accountant before choosing this benefit.
Install during the set period
The federal tax credit only applies to solar panels installed within a set period. The federal government currently is applying the tax credit to solar systems installed by December 31, 2023. In the past, the federal government has extended the time for solar panel tax credit, but this extension may be a one-time affair.
Understanding tax credits
A tax credit is an amount reduced from your overall tax bill. The current tax credit for installing a solar photovoltaic system varies based on the program you choose and its price. For example, if you receive a $1,000 tax credit, and you owe $2,500 on your taxes, your tax bill will total to $1,500. You can roll your tax credit into the next year, but you cannot receive cashback from your tax credit.
Keep track of expenses
Your tax credit is based on how much you spend on the entire system. It includes a percentage of the cost of the solar panels as well as labor costs, which include:
- Installation costs
- Permit expenses
- Inspections fees
- Developer fees
The other expenses you can claim toward the total tax credit include accessories like inverters, wiring, mounting hardware, and batteries.
The entire value is not covered
The solar energy tax credit is an investment tax credit that gives people a 26 percent deduction from the cost of your solar panel purchase and installation expenses. Residential and commercial systems are eligible, and the federal government does not cap the amount.
If you receive any state or local incentives, they do not reduce the amount you can claim on your 26 percent investment tax credit. Those incentives are in addition to the tax credit, so it is wise to find as many incentives and credits as possible.
Wrap up
The solar energy tax credit will not last forever. Since the federal government does not cap the tax credit, homeowners can install solar panels from the best installation company in the area. Solar panels are in demand, so place your order and schedule installation before the tax credits expire.
Read Also : 5 Cause and Effect of Having Solar Panels at Home
