What is the Solar Investment Tax Credit?
The solar tax credit in 2020 is 26% which means you can get 26% of your costs back from the government. So if it costs you $15,000 to go solar, you owe $3,900 less on your taxes. The solar tax credit expires in 2022 and goes down every year.
How does the 26% Solar Tax Credit work in 2020?
When you install a solar energy system in 2020, the government rewards you with a credit of 26%. A tax credit is simply a reduction in the amount of tax you owe at the end of the year.
How much money will I actually save by using the Federal Solar Tax Credit in 2020?
This depends on the overall cost of your system however, to do the calculation we'll simply want to take your total (estimated) costs and multiply it by .26. So for example, if it's going to cost you $15,000 for all the solar equipment - $15,000 x .26 = $3,900... So this would be the amount deducted from your taxes.
How do I claim the investment tax credit?
You'll claim the investment tax credit when you file your taxes at the end of the year. So you'll want to let your accountant know you've gone solar or if you do your own taxes, you'll need to fill out the IRS Form 5695.
What costs/expenses can you actually claim?
- Solar equipment
- Freight shipping costs
- Solar consulting fees
- Professional installer fees
- Electrician fees
- Engineer fees
- Tools bought or rented
- Wiring, screws, bolts, nails, etc.
- Equipment purchased or rented (scaffolding or a man-lift, for example)
- Permitting fees
- Permitting service costs
Other Important Notes...
- In order to qualify you need to own your solar energy system, not lease.
- If you owe less tax then the total amount of your savings, you can carry over remaining credits to the following year.
- The tax credit will end soon
As always, consult your local accountant/lawyer for more advice but this post covers everything you need to know!