Event Horizon Solar & Wind Inc
Providing Solar and Wind power for 17 years.
616-389-3172 9am to 5pm eastern.
|When most consumers set out to do research about solar panels,
they will eventually come across the Residential Renewable Energy
Tax Credit also known as the Federal Investment Tax Credit (ITC).
This tax credit allows you to claim up to 30% of the price you pay
to install solar panels, which discounts the cost going solar
significantly. The credit has no limit and will be available through
December 31, 2019 and stepped down thereafter.
Admittedly, the solar tax incentive is confusing, and many of our customers have questions about it. While Event Horizon Solar is not licensed to give tax advice, and we recommend that you consult with a tax professional on all tax matters, we hope that by explaining the basics of the solar tax credit you will have a better understanding of how it will work for you when you are ready to purchase a solar system.
Many people are led to believe that they will receive a check from the federal government after they file their taxes, similar to how typical rebate works when purchasing a product. However, this is not true! The tax incentive is a credit, meaning that when you file your Federal taxes you can claim 30% of the qualified expenditures of your solar system.* If you owe Federal taxes that year, then the credit can be applied and you will either A) owe less, B) owe nothing, C) owe nothing and have a credit left over.
Let’s look at these situations in greater detail. To guide our sample scenarios, we’ll imagine that Joe Solar paid a total of $25,000 for the installation of his solar electric system on his home’s rooftop. This amount qualifies him for a $7,500 Federal tax credit.
In Scenario A (where he would owe less) April arrives, he files his taxes and claims the 30% solar tax credit. It turns out he owes $10,000 in taxes, so the entire $7,500 is applied and he writes check to Uncle Sam for the remaining $2,500 that he owes.
For Scenario B (where he would owe nothing) Joe went to his employer and told him that he would be getting a $7,500 tax credit for the year. The employer adjusted Joe’s withholdings on his pay check so that he took home more money and would owe $7,500 to the IRS in April. In April, Joe applies the $7,500 tax credit to his $7,500 tax bill and owes nothing.
For Scenario C (where he would owe nothing and have a leftover credit), we find out that Joe only owes $1,200 in taxes. His tax credit covers this $1,200 amount that he owes and then the remaining $6,300 tax credit will roll over to any succeeding taxable years through 2016. It may be possible to roll any remaining tax credit past 2016, but it’s not entirely clear as reported by DSIRE.