{Are|Can|Do} Solar Energy {Tax|Credits Tax} Credits Refundable?
{What is the|What exactly is|What's the} Federal Solar Tax Credit?
{Federal investment tax credit can|Federal investment tax credit may|The federal investment tax credit can} {be claimed as a|get claimed for a|claim as} tax {credit on|credit for|deduction on} {federal income tax|the federal tax on income|Federal income taxes}. {It is for a certain|It’s for a specific|It’s a} {percentage of the price|amount of the cost|percent of the cost} {of a solar photovoltaic|for a solar PV|of solar solar} {system|panel|solar system}.
Other {types|forms} of renewable energy {may also|could|might} be eligible for {similar credits|credits similar to those mentioned above|the same credits}{, but they are not| however they aren’t| However, they are not} {covered in this guidance|included in this guideline|covered by this document}.
The system {must|has to|should} be {in use|operational|operating} {during the tax year|in the tax year|throughout the tax year in order} to {generate|produce} electricity for {a residence|homes|residences} {in|within|located in} the United States. The IRS {does not have a|has no|doesn’t have a} {clear-cut test for what constitutes|specific definition of what is|precise definition of} “placed {into service,|in service|to service}” {but it has defined the term|however, it defines the word|although it does define the phrase}{ as completed|”completed” as an|”complete” as} installation.
Congress {approved|has approved|authorized} an extension {to|of} the ITC {in December 2020|in December of 2020|in December 2020}. It {provides 26%|offers a|grants a 26%} {tax credit for solar systems|credits for systems that are solar|tax credits to solar panels}{ that were|} {installed between 2020-2022|installed between 2020 and 2022|constructed between 2020-2022,} and 22% {for those|for systems|to those} {installed|that were installed|constructed} {between 2023 and 2023|between 2023-2023|in 2023 or 2023}. Systems {installed prior to|that were installed prior to|that were installed before} {December 31, 2019|the 31st of December, 2019|Dec. 31, 2019}{,|} {were eligible for a 30|could qualify for a 30|were eligible for a 30-year}{%| percent} credit. {Unless|If} Congress {renews|extends} the credit{, the state tax credit| and the tax credit for state taxes| or extends the credit, the state tax credit} {will expire in|is set to expire by|runs out in} 2024.
{There is no limit|You are not limited|It is not a limit} {to|on} the amount you {can claim|are entitled to claim|are able to claim}.
{What is the purpose|What's the point|What's the goal} {of this tax credit|for this tax credit|to this tax deduction}?
Imagine your solar {system being|system|panel being} valued at {$20,000|around $20,000}. {This would be|It would be|This is} {a system of approximately|an array of around|the equivalent of a system that is} 8 {kilowatts|Kilowatts}. It is {medium-sized in [region|medium-sized in the [region|a medium-sized system in [region}{]|the region of|in the region}.
You {could save $5,200|could save up to $5,200|can save $5,200} by taking {a|advantage of a} 26% {credit|tax credit} {on your federal taxes If|on federal taxes. If|for federal tax if} {the tax you owe|your tax liability|the amount of tax you have to pay} is {less|lower} than the {credit you receive|amount you get|credit you are granted}{, the| The| and the} tax credit will{ continue to|} {roll|continue to roll|be carried} {over year after year|over the years|across the year}.
{Any homeowner|Anyone who lives|Every homeowner} {in|located in|within} the United States can claim the federal solar investment tax credit{,|} {provided that|in the event that|as long as} the solar {system is installed|system is set up|panel is installed} {for residential locations|in residential areas|for residential properties} {within|in|inside} the United States. It {does not need|doesn’t have|does not have} {to be your primary|for it to be the primary residence|as your main} or {secondary|second} {residence|home|residence}.
The system {must|should|has to} be {in use|operational|used} {during|in|throughout} {the tax year|this tax season|your tax-year}. If you {set up|install|are able to set up} and {start using a residential|begin using a residential|start using a home} solar panel system {in|during|by} {the year 2022 you will|2022, you will|the year 2022 , you’ll} be {eligible for the credit in|qualified for the tax credit on|eligible to claim the credit on} {your 2022 tax filing|the tax return for 2022|the 2022 tax year}.
You {can|are able to} {claim credit for a|get credit for a|claim credit for} solar panel {system installation that|installation} {you started|was completed|began} in December 2022{, but|, however|. However,} you {don’t|can’t|won’t be able to} {turn it on|start it|switch it on} {until January 2023|until January 2023|until the beginning of January 2023}.
{Future|The Future|the future} of the Solar Tax Incentive
{This solar incentive is currently|The solar incentive is|This solar incentive is} being {phased out|eliminated|removed}. {Its value is decreasing steadily|The value of the incentive is declining steadily|Its value is decreasing slowly}. It will {be unavailable|not be available|no longer be available} {to homeowners beyond 2023|for homeowners after 2023,|to homeowners for the next 2023 year} unless Congress {renews it through|renews it with|extends it by} the Build {back|Back} Better Act or {another|other|a different} legislation.
What {does|is|exactly is} {the|what does the|this} Solar Tax Credit cover?
The {federal tax credit covers|tax credit for federal taxpayers covers|federal tax credit is} {26% of the|26percent of|up to 26% of} {costs|cost|expenses} for {those taxpayers who have|taxpayers who have|taxpayers who} {installed and started|installed and begun|set up and are} using {a solar PV system|solar PV systems|solar PV} {by|in|before} 2021.
Solar panels cost
{All other solar equipment such|Other solar equipment, such|All other solar equipment , such} as inverters{ and wiring,|, wiring and so on| and wiring} {as well mounting hardware,|and mounting hardware,|as well as mounting hardware} {are included|are also included|are included}.
- {Solar panel installation labor costs|Costs of solar panel installation labor|Labor costs for solar panel installation}{, including fees for inspections| include inspection fees| which includes inspection fees} and permits
- {Solar panels and solar batteries are the|The solar panels as well as the batteries that they are|Batteries and solar solar panel are the} {only|sole|primary} source of energy {for|used in|to power} {energy storage devices|storage devices for energy|storage devices that store energy}.
- {Sales taxes are paid for|Taxes on sales are charged for|Sales tax is paid to cover} {eligible solar installation expenses|qualified solar installation costs|the solar installation expenses that are eligible}. {However, some states|Certain states, however,|Some states however} exempt PV{ system|} equipment from {sales tax|taxation}.
The Solar ITC's {history|story|past}
The {original creation of|initial creation of|first time} the {solar investment tax credit|tax incentive for solar investments|credit for investment in solar} {was|came} {through|by|as a result of} the Energy Policy Act of 2005. Since its {inception|beginning|creation}{, it| it| the credit} has been a {bipartisan ally|bipartisan allies|bipartisanally allied}. The credit was {originally set|initially scheduled|initially set} {to expire in 2007|for expiration in 2007|to run out in the year 2007}.
The credit {proved popular among|was well-liked by|was a hit with} homeowners {all over the country|across the nation|from all over the country} and Congress {decided|took the decision|was able} to extend it {multiple|several|numerous} {times|times}.
The credit will {still be|be|remain} {available for|accessible to|accessible for} residential solar systems {through|until|up to} 2023{ and commercial solar energy|, and commercial solar energy| and commercial solar} systems {until 2024, as|up to 2024, just as|up until 2024, the same way} it is {now|currently|today}. {An act of|A bill in|An act by} Congress could {make it more|increase the amount} {available, so|accessible, so that|availableso that} {future homeowners and solar users|the future homeowners and solar users|future homeowners and solar consumers} {can reap the financial benefits|will be able to reap the financial benefits|are able to benefit financially}.
{Are you eligible|Do you qualify|You are eligible} to {claim|take advantage of} {the|your|you are eligible to claim} Federal Solar Tax Credit
{To claim|To qualify for|In order to claim} {the federal solar credit|an exemption from the solar tax credit in federal law|Federal solar credits} and {receive|get|to receive} {money back for your investment|the money you invested|cash back on your investment} in {solar energy system|a solar system|solar power}{, you must meet| You must meet| you must satisfy} {these criteria when filing|these requirements when filing|the following requirements when submitting} your {2021 tax returns|tax returns for 2021|tax returns in 2021}:
- {Your solar PV system should|The solar PV system you have installed should|Your solar PV system must} {have been|be} {installed between January 1|put in place between the 1st of January|set up between January 1st}, 2006 {and|to} {December 31, 2021|December 31, 2021}.
- The system {must|should|has to} {have been installed|be installed|be in place} {at your primary|in your main|either at the primary residence} or {second|secondary|your second} {residence|home}.
- {You must have|You have to own|It is mandatory to have} {the solar PV system|your solar panel|an solar system}{ whether|, whether| in place whether} you {purchased it upfront|bought it in the first place|bought it outright} or {finance|financed|borrowed} it. {You won’t be eligible|It is not possible|You will not be able} to {claim|receive|take advantage of} {the tax credit|this tax deduction|an income tax rebate} if{ you|} {will be deciding to do|are planning to take out a|decide to opt for a} solar lease.
- {You must have used|You have to have utilized|It is necessary to have installed} {the solar power|your solar energy|this solar} system{ for|} {the|your|it for the very} first time. {This credit can only be|The credit can only be|This credit is only} {claimed once for the|used once per|granted once for the} “original” {installation of your|setting up of the|setup of} solar PV {equipment|system|device}. {You can’t claim another|It is not possible to claim another|You cannot claim a second} credit {if you move houses|in the event of a house move|if you relocate your house}.
What are the {expenses|costs|charges} {included|comprised|that are included}?
{These expenses|These costs|The following expenses} {are included in the|include in|will be included within the} {price|cost}:
- {Solar PV panels|The solar PV panel|Panels of solar power} can {power an attic fan,|be used to power an attic fan|provide power to an attic fan} {but not the fan itself|however, not the actual fan|but not the fan itself}.
- {Labor costs for contractor preparation|Costs for labor and preparation for contractors|The cost of labor for contractor preparation}{, assembly, or| as well as assembly or| and assembly, as well as} {initial|the initial} installation. {Inspection fees, permit fees|Permit fees, inspection fees|Fees for inspection, permits}{, and| and| as well as} {developer fees are all included|developer fees are all included|developer fees are included}.
- {Wiring, inverters,|Inverters, wiring,|Wiring, inverters} {and mounting equipment|as well as mounting devices|along with mounting machines} are {examples|all examples|some examples} {of stability equipment|of equipment for stability|that stability devices are available}.
The{ associated|} solar PV panels {charge|are used to charge|can charge} {energy storage devices|storage devices for energy|batteries for energy storage}. {However, storage devices can|Storage devices, however, can|However, storage devices may} {still be charged by them|be charged|still be charged} {in the tax year following|during the tax year following|after tax year} {installation|the installation}.
Earn More Solar Incentives
You {may be eligible|could be eligible|could qualify} {for rebates, programs,|to receive rebates, programs|for rebates, programs} {and tax incentives from the|and tax incentives from|as well as tax incentives from} states, {depending|based} {on where you are|on the state you reside in|upon where you live}. {These other solar incentives can|Other solar incentives may|These solar incentives could} {have an impact on|affect} {your|the} {federal tax credit|Federal tax credits|income tax deductions under the federal system} in {certain|some|specific} {cases|circumstances|situations}. Here are {some things|some of the things|a few things} you {need to know:|should know:|need to knowabout:}
Subsidies {from your utility provider|from your utility company|provided by your utility provider}{: Subsidies from utility companies| Subsidies from utility providers| Subsidies provided by utility companies} {are typically excluded from|typically are not included in|generally are not included on} {income tax returns|tax returns for income}. {Before you can|In order to|Before you} {calculate your tax credit,|calculate your tax credit|determine your tax credit,} you {must|need to|have to} subtract the rebate {for installing|you received for installing|to install} solar {from your system cost|panels from the cost of your system|from the total cost of your solar system}. The net metering {compensation|allowance|payment} {shouldn’t impact|will not affect|should not impact} {your|the} {federal tax credit|Federal tax credits|income tax deduction for federal taxes}.
{Rebates from state-sponsored programs|State-sponsored rebates|Rebates from programs sponsored by the state}{: Federal tax credits| Tax credits from federal programs| Federal tax credits} {are not affected by|do not affect|don’t affect} {rebates from the state|state rebates.|rebates provided by the state} government.
State tax credits{: A state credit| State tax credits: A state credit| The state tax credit you receive} for {residential solar systems|solar panels in residential homes} {will not reduce|does not affect|won’t reduce} {your|the} {federal tax credit|Federal tax credits|tax deduction from the federal government}. {A state tax credit|State tax credits|A tax credit from the state} {will increase|can increase|will boost} your {taxable income, since|tax deductible income since|tax-deductible earnings, as} {you have|there is|you pay} less {state income tax|income tax from the state} to {report|declare}.
Renewable energy {certificate payments|certificates}{: You will most likely| Most likely, you will| The most likely scenario is that you’ll} be {able to declare any income|eligible to declare any earnings|allowed to declare any revenue} from the {sale|selling|purchase} {of renewable energy certificates|certificate for renewable energy|in renewable energy certificate} as {taxable|tax-deductible} income. {It will therefore increase|This will increase|Therefore, it will add to} your {gross income|income gross}{, but not| however it will not affect| however, it won’t affect} {your|the} tax credit.
{How do you|What are the steps to} {claim|get|apply for} {the|your|this tax credit?} Solar Investment Tax Credit
You {can|are able to|may} {claim|get|benefit from} the {solar tax incentive|tax incentive for solar} {as part of|in|as a part of} {your federal tax return|the federal return for tax|you federal tax returns}. {A reputable solar industry|An experienced solar company|A reliable solar business} will {provide instructions and documentation|give you instructions and proof|offer instructions and documents} {on how to claim|regarding how to claim|for claiming} the ITC for {your solar installation|your solar project|the solar installation you have made}. {Here’s a brief overview|Here’s a quick overview|This is a brief outline} of {how it will work|how the process works|the procedure}.
{Although it is quite simple|While it’s quite easy|Although it’s a simple process}{, it is best to| however, you should| but it is recommended to} {speak with a tax professional|consult a tax professional|talk to a tax expert} {before you file your|prior to filing your tax|before filing your tax} return.
These steps {will help you|can help you|will allow you to} {claim|get|take advantage of} {the federal solar tax credit|this federal tax credit for solar energy|your federal solar tax credit}{:|}
- {You can download|Download|It is possible to download} IRS Form 5695 to be included {in|on} {your tax return|the tax returns you file|your return for tax purposes}. {You can download this residential|It is possible to download this residential|You can download this residence} energy credit form{ directly|} {from|through|via} the IRS.
- {Calculate|Determine|Find the} Part I credit (a {standard solar system will|typical solar system will|standard solar system would} be {filed|classified|recorded} {under|in the category of|as} “qualified {solar electric property costs|cost of solar electricity|electrical property cost for solar}”) {Line 1|1. Line|First line}{: Enter| Input} {your total project costs as|the total cost of your project as|the total costs of your project in the manner} they {appear|are listed} {in your contract|on your agreement|within your lease}. {Next,|Then, you must|After that, you’ll need to} {complete the calculations at|complete the calculations on|finish the calculations in} {lines|the lines} 6a-6b.
- If solar {is the only renewable energy|is the only renewable energy source|is the only renewable source of energy} {you have and there’s no|you’re using and there’s no|you’re using, and you don’t have a} {rollover credit from previous|credit for rollovers from prior|credit rollover from previous} years, {then skip to|skip to|you can skip} line 13.
- Calculate {any tax liability limits|tax liability limits|any tax liability limit} {using|by using|with} the {Residential Energy Efficient Credit|Credit for Residential Energy Efficiency} Limit Worksheet (found {HERE|here}) {at line 14|on line 14|in line 14}. {Next, perform calculations at|Then, you can calculate the limits at|Then, make calculations on} lines {15-16|15-16}.
- {Make sure you|Be sure to|You must} {enter the figure at|include the figure on|fill in the figure at} {line 15 of|the 15th line of|the line 15 on} {your|the} {Schedule|schedule|Calendar} 3 (Form 1044){, line 5| Line 5| and line 5}.
- {Recall|Remember|It is important to remember} that {the tax credit does|tax credits do|the tax credit will} not {offset the taxes|cover the tax|reduce the taxes} you {owe|have to pay|must pay}. {The credit will be|The credit is|Credits are} carried forward {year after year|each year,|from year to year} {if the tax you owe|when the tax you owe|in the event that the tax you have to pay} is {less than the credit|lower than the credit|less than the tax credit} earned.
- {You should also file the|It is also recommended to file the|You must also file an} ITC.
{What's the difference between a|What is the difference between a|What's the difference between} {credit and a rebate tax|tax credit and rebate tax|tax rebate and a credit}?
This {is not a rebate,|is not a rebate|isn’t a rebate,} {but|it’s|instead it is} {a|an income} tax credit.
{A tax credit is|Tax credits are} {a reduction of the|an exemption from the|reduced} income tax {that you would|you would|you’d} otherwise {have to pay dollar|pay|be required to pay} for dollar. A {$1,000 federal tax credit|tax credit of $1,000} {can reduce|could reduce|can lower} {your federal income taxes|the federal tax on income|your federal income tax} {by $1,000|by $1000|by $1,000}.
Tax credits {offset any balance|can offset any balance|help offset any amount} {owed|due} {to the government|by the federal government|towards the state}. If you {don’t owe|do not owe|don’t have} any {tax, you have|taxes, you have|tax, there is} {nothing to offset,|no balance to offset|nothing to offset} and {can’t use|you aren’t eligible to use|therefore, you can’t take advantage of} tax credits.
Even {if the taxpayer owes no|even if the taxpayer is not liable for|when the taxpayer does not owe} taxes, tax {rebates|credits} {are available to them|are offered to them|can be obtained}. {There are some people who|Certain people|Some people} {do not qualify|are not eligible|cannot be eligible} {for the solar tax credit|to receive the tax credits for solar|in the solar tax incentive}. {The solar tax credit|Solar tax credits|This tax credit} {is not|isn’t} {available to|accessible to|for} {those|people} {who owe federal income taxes|who owe federal income tax|who owe federal income taxes}.
{You may not be|It is possible that you are not|You might not be} {eligible|qualified} {for|to receive} {the solar tax credit|this tax incentive|an exemption from solar taxes} if{ you|} {are on a fixed income|have a fixed income|are on a fixed-income}{, retired or have only| or retired, or have only| either retired or} {worked part of the year|been employed for a short period of time|had a job for a small portion of the year}.
{Notice: The credit can|Note: The credit may|Notification: The credit could} {be used to pay|use to cover|serve to help pay}{ the|} federal {taxes owed|tax owed|taxes due} {if you owe enough|in the event that you are owed|when you have a sufficient amount of} federal taxes {in the year|during the year|during the time} you finance or {buy|purchase} {your system|your equipment|the system}. {The federal government will credit the tax credit|Federal government credit tax credits|Tax credits from the federal government can be used} {for|to|as} {a tax refund if|tax refunds if|tax refunds in the event that} {you have already paid the|you’ve already paid} taxes.
The {refund|money|cash refund} {can be used for the|is able to be used for|could be used to} {repayment of a|payment of the} loan balance. {You can carry the credit|The credit can be carried|Credit can be carried} forward for {one|a} year. This means {you can|that you can|you are able to} {use any remaining tax credits|make use of any tax credits left|utilize any tax credits remaining} to pay {next year’s taxes|taxes for the following year|for taxes in the coming year}.
Are {there solar tax credits for|solar tax credits available for|there solar tax credits in} 2022?
In 2005{,|} {the|2005 saw the|legislation known as the} Energy Policy Act of2005 brought{ about|} {the solar investment tax credit|an investment credit for solar|the tax credits for investment in solar}. {This federal solar tax credit|The federal solar tax credit|This tax credit for solar energy in the federal government} was {initially intended|originally planned|originally set} {to expire in 2007|to end in the year 2007|for expiration in 2007}{,|} {but the program’s popularity|however, the popularity of the program|however the program’s success} has {resulted in homeowners being|led to homeowners being|seen homeowners} {able to receive|granted|eligible for} an extension {through|until|to} {2023|2023}.
The {terms of the credit have|conditions of the credit have|terms of the credit} changed {from year to year,|each year|from year to year} even {though|when|the fact that} {they were|the credit was|it was} extended.