How to Claim Your Solar Tax Credit
If you’re in the market for getting solar, you’ve most likely heard about the federal tax credit, otherwise known as the Investment Tax Credit (ITC). This tax credit grants homeowners and businesses a tax deduction equal to 26% of the total cost of a solar energy system through the end of 2023. After 2023, this tax credit amount will be decreased to 22%.
There are plenty of benefits to claiming your residential ITC, but applying for the credit requires research and planning. Claiming your federal tax credit boils down to a few simple steps:
1. Determine if you’re eligible for the credit
It’s important to ensure you have enough tax appetite to use the federal tax credit against your total taxes. Consult with your tax advisor to determine if the federal ITC can apply to you.
2. Complete IRS Form 5695
This form can be found online and will validate your qualification for the credit.
3. Add renewable energy credit information to your typical form 1040
Be sure to mention your renewable energy credit into your regular tax form.
4. Compare your solar quotes to maximize savings
Getting at least 3 total solar quotes is recommended to ensure you're getting the best deal for your solar energy needs.
How do I know if I’m eligible for the solar tax credit?
- You’ll need to own your solar energy system, rather than leasing it. Leasing a solar energy system means that the third-party owner gets the solar tax credit.
- You may still be eligible even if the solar energy system is not your primary residence, just as long as you own the property and live in it for a part of the year.
- If your federal tax liability is lower than your ITC savings, you can still carry over remaining credits to the following year!
It’s important to note that the team at A.M. Sun Solar are experts in solar; while we are happy to answer any questions about solar, we recommend you connect with a tax advisor before deciding what is best for you!