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Did you recently switch to solar power?

Investing in renewable energy contributes to a better future. After all, over 40% of the U.S.’s Carbon Dioxide pollution is from fossil fuel consumption.

However, the primary benefit of residential solar power is the monetary savings. You need not worry about the upfront costs since solar energy incentive options exist.

The only problem without prior experience is filing your 2022 solar tax credits. Read on as we discuss how to claim solar tax credit for your residential power system:

Are You Eligible for Solar Tax Credits?

The good news is you’re eligible for the Federal solar energy incentive as long as you own your solar panel system. It means you can’t get this benefit if you signed a lease agreement instead.

When leasing, the original owners get the tax credit instead. It also applies to most state and local solar incentives. However, solar renewable energy certificates (SRECs) could grant you financial benefits.

The incentives apply even when the solar panel system isn’t in your primary home. As long as you own the property and live in it for some time, you can claim your credit.

Is your federal tax liability lower than your ITC savings? If so, you can carry the remainder to the following year.

Consider looking at the Blue Raven Solar map to determine whether this solar company is in your area. Their solar panel systems are eligible for tax credits.

Fill Out the IRS Form 5695

Include the IRS Form 5695 in your Federal tax filings. It allows you to calculate the tax credits gained from solar panels. It also applies to other home energy improvements, such as small wind turbines.

Start by putting the gross cost of your solar energy system to Line 1. Put the amount after any cash rebates. If you have other energy improvements, put them on Line 2-4.

Put the total value of these improvements and Line 5. On the following line, write the total Solar Tax Credit Amount. Multiply Line 5 with 26% since it’s the current percentage.

If you have no prior tax credit or fuel cells, copy your Line 6 answer to Line 13. Complete the fourth page of the Form 5695 instructions if you have a tax liability. Put the result on Line 14, compare it with Line 13, and put the smaller value on Line 15.

Add the Credit Amount to IRS Form 1040

Get the Line 15 result from IRS Form 5695 and put it on your IRS 1040 at Line 53. Once you do, you can now claim the Federal Solar Tax credit after filing your taxes alongside Form 5695.

Do you need help with your tax filings? If so, consider getting a reputable tax advisor. It allows them to collaborate with your solar company.

Learn How to Claim Solar Tax Credit Now

These are the steps on how to claim solar tax credit. Never let your contribution to the environment go unnoticed. Use these to get solar tax incentives and save more money.

Did you find this guide helpful? If so, read our other posts today.

The tax credit today 

The Consolidated Appropriations Act, 2021 extended the 26% tax credit through 2022. It will drop to 22% in 2023 and expire at the end of 2023. 

For example, if you pay $14,000 for a solar panel system in 2021 (or in 2020 or 2022, for that matter), you’d be eligible for a $3,640 tax credit. Keep in mind that any other incentives provided by your state or utility company aren’t included in the total. So if you receive $4,000 in state or utility incentives, only $10,000 of the original $14,000 cost could be applied to the federal solar tax credit, taking the total tax credit down to $2,600. 

The good news is that you can buy solar panels with the expectation that you’ll get a decent reduction in your taxes. We’ll continue to track this tax credit over time and provide updates if any of the current provisions are extended beyond 2022 — or change completely. The deal may be renewed yet again, but with the current step-down plan in the new law, if you don’t take advantage of the 26% tax credit, you’ll get less money back if you buy solar panels after 2022.