The federal solar tax credit steps down from 30% to 26% at the end of 2019

Nobody knows for sure if Donald Trump will repeal the 30% solar tax credit but what we do know is that it is available now and you should get your solar panels installed while this remains the case.

What do you want to know about the federal solar tax credit?

What is the federal solar tax credit?

The renewable energy tax credit is a law, extended by the federal government in December 2015 that allows a taxpayer claim a credit of 30 percent of qualified expenditures for a solar system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer.

Expenditures with respect to the equipment are treated as made when the installation is completed.

What is the federal solar tax credit?
How long does the 30% federal solar tax credit last?

How long does the 30% federal solar tax credit last?

In relation to solar electricity the investment tax credit (ITC) offers an income tax credit for systems installed in each year as follows:

  • 30% for systems placed in service by 12/31/2019
  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021
  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022
  • There is no maximum credit for systems placed in service after 2008.
  • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
  • The home served by the system does not have to be the taxpayer's principal residence.

Is there financing available to cover the 30% solar panel tax credit until I do my taxes?

The solar industry is aware that many people do not have the financial capacity to pay for a system and then wait until they do their taxes for that year sometime the following year to get the federal solar tax credit back. Your solar installer will typically be able to offer you a loan product to cover this period as well as a longer term loan to cover the other 70% of the solar system.

What solar system costs are eligible for the solar panel tax credit

Eligible expenditure include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. Put simply this means that generally the entire value of your quote from a solar company to install solar panels is eligible for the tax credit.


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Is there a $ limit of the solar tax credit?

There is no limit on the $ value of the federal solar tax credit.

Is there a $ limit of the solar tax credit?
What if I don't owe as much in taxes at the end of the year as 30% of the value of my system?

What if I don't owe as much in taxes at the end of the year as 30% of the value of my system?

The federal tax credit is a credit and not a rebate meaning you must have enough tax liability to get full use of the credit.

However, the federal tax credit exceeds your tax liability in the year of installation, the excess amount may be carried forward to the succeeding taxable year.

Some people are concerned that because they have tax withheld from their pay by their employer over the course of the year, and so have no additional tax liability due at the end of the year that they may not be able to use the credit. This is not the case, where you have paid tax in installments during the year then the value of the tax credit would be issued as a refund.


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How do I claim the solar tax credit?

To claim the 30% solar tax credit you simply complete a Form 5695 and add the results of this to your main tax return for the year in which the solar panel installation is completed.

How to complete Form 5695

Form 5695 calculates tax credits for a variety of qualified residential energy improvements. You only need to worry about line 1 being the line for solar electricity. Insert the total cost of your solar panels system, including installation into line 1.

1 Qualified solar electric property costs 1 $20,000
2 Qualified solar water heating property costs 2 0
3 Qualified small wind energy heating property costs 3 0
4 Qualified geothermal heat pump property costs 4 0
5 Add lines 1 through 4 5 $20,000
6 Multiply line 5 by 30% (.30) 6 $6,000
Assuming you are not also receiving a tax credit for fuel cells installed on your property, and you aren't carrying forward any credits from last year, put the value from line 6 on line 13.

Now you need to calculate if you will have enough tax liability to get the full 30% credit in one year.

  • Complete the worksheet on page 4 of the instructions for Form 5695 to calculate the limit on tax credits you can claim. If you are claiming tax credits for adoption expenses, interest on a mortgage, buying a home for the first time, or buying a plug-in hybrid or electric vehicle, you will need that information here.

The steps above outline all you need to do to have 30% of the cost of your solar panel system credited back to you! If you did energy efficiency improvements to your home in the same year, you may also need to complete page 2 of Form 5695. Either way, be sure to include Form 5695 when you submit your taxes to the IRS.

How to gather solar quotes to take advantage of the federal solar tax credit in 2019?

If you enter your details into the solar calculator and this will calculate the size of solar system needed to power your home, show how much solar will save you and if you then choose to complete your contact details it will get the best rated solar providers near you to confirm the online estimate with an accurate solar quote.


Find out how much the Federal solar tax credit could save you




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