J Ferg Knowledge Base
Understanding the Solar Investment Tax Credit
The solar investment tax credit came from the Energy Policy Act of 2005. The act established the Federal ITC (Investment Tax Credit) and extended to expire two years later at the end of 2007. The solar industry increased while creating thousands of new jobs working towards a more sustainable lifestyle. As a result of this exponential growth, Congress extended the expiration date multiple times throughout the years. The latest extension was part of the COVID relief bill and was determined to end in 2023.
What you receive:
The government will give you a tax credit for 26% of your total project cost when you install a solar system.
Expenses you can claim:
For example, if you install a solar system for $10,000, you can get a tax credit worth $2,600 or 26% of your total project cost. This tax credit can be used to reduce the amount of taxes you owe for that year.
$5,000 (tax bill)
-$2,600 (tax credit)
$2,400 (taxes owed)
Think about it like this, say you owe $5,000 in taxes, the $2,600 solar investment tax credit will diminish over half of your taxes owed that year.
What you need to know:
- The credit is worth 26% for systems installed in 2021 and 2022, then decreases to 22% in 2023 and disappears in 2024.
- To claim the credit, fill out IRS form 5695 and attach it to your tax return for the year you installed.
Thinking long-term, solar panels have minimal maintenance; brushing dirt and grime off occasionally should keep them clean. Solar power also creates energy independence because you do not rely on traditional electric companies. Lastly, solar panels will increase the value of your home and provide clean and renewable energy year-round.
The bullet points: What is the solar investment tax credit?
- The solar investment tax credit is a federal tax credit that can be claimed on income taxes for 26% of the cost of a solar photovoltaic (PV) system. That’s right, your federal income tax will be reduced by 26% of the amount of your solar investment.
- The system must be placed and begin service during the tax year and generate electricity for a home located in the U.S. So, your new installation in 2022 will be eligible while filing your 2023 taxes.
- A solar energy PV system must be placed into service before December 31, 2022, to be claimed in 2023.
- There is no maximum amount that can be claimed, so take advantage while this offer lasts!
Going solar has never been easier
Now is the perfect time to make the switch to solar. At J Ferg Solar, we’re here to provide answers to your solar questions and provide homeowners energy independence. If you’re ready to pay less in taxes, increase your home’s value, save money, and help the environment, contact J Ferg Solar today!
The First Step Is To Connect With Us.
Give us a call or use the contact form here to get in touch with a member of our team. From there, we will figure out the best course of action to get your needs taken care of.