One of the most lucrative aspects of installing a system of solar panels on your home is how to best take advantage of the savings from the Federal Solar Tax Credit. Here at CAM Solar, we have done our best to keep our customers throughout Colorado and Texas up to date on how they can take advantage of this renewable energy tax credit. 2020 wasn't all that bad as the solar tax credit was extended at the end of the year, which means the 26% solar tax credit rate will remain in place for another two years before starting to decline in 2023!
How the Solar Tax Credit Works
Through this solar tax credit, also known as the “Federal Investment Tax Credit” or “ITC,” home and business owners who install a residential or commercial system in 2021 can deduct 26% of the cost of their system from what they owe in federal taxes. This means that for every $10,000 you spend on solar installation, you can reduce $2,600 from your federal tax liability. Even if you owe less than your full deduction amount, you can rollover the remainder into the following year’s taxes, ensuring you get to use the full amount of this tax-based incentive.
How the Solar Tax Credit Will Decrease From 2021 - 2024
The step-down of the solar tax credit was outlined back in 2015, when it was extended for the first time to allow more homeowners access to the savings. In December 2020, the solar tax credit was extended again prolonging the 26% solar tax credit for another two years. Here's what the solar tax credit extension means for future years:
- 2021 - 2022: Remain at 26% for residential and commercial systems
- 2023: Reduce to 22% for residential and commercial systems
- 2024 and beyond: Tax credit reduced to 10% for commercial systems while residential systems no longer qualify for the incentive.
What Kind of Solar PV Systems Qualify for the Solar Tax Credit?
In order to qualify for the savings of the Federal Solar Tax Credit, you must:
Live in and own your home
Own your solar panels (solar leases do not qualify)
Have federal tax liability (if you don’t owe the federal government any taxes, you can’t save on them!)
Solar-plus-storage systems also qualify for these tax savings under certain conditions, for those that are looking to install a custom designed, solar energy system with a solar battery that will keep your home powered with renewable solar energy, even during a power outage. CAM Solar is a Tesla Powerwall Certified Installer. CAM Solar can retrofit a Tesla Powerwall solar battery to fit existing solar PV systems or include it in a new solar proposal.
How to Claim the Federal Solar Tax Credit on Your Taxes
One thing that will not change is how to claim this renewable energy tax credit on your taxes. For homeowners, here are the basics:
- Keep all receipts related to your solar installation project.
- Obtain and fill out IRS Form 5695.
- Add your solar tax credit information to your typical IRS Form 1040.
What You Should Know About Going Solar in 2021 in Texas and Colorado
Here at CAM Solar, we make it our job to be a resource for homeowners throughout Denver, Colorado Springs, Aurora, and Pueblo, CO, as well as San Antonio, Austin, and Rio Grande Valley, TX. It is our philosophy that we are not here to sell you on solar — the energy savings and reduced carbon footprint can do that for us. We are just here to provide you with the up-to-date and accurate information you need to make your own decisions when it comes to the energy you use at home.