Tax season is upon us – the dreaded time you find out how much of your hard-earned moolah that will be handed over to Uncle Sam. We feel your pain. What better time to dive into the Federal Solar Tax Credit?
Inflation Reduction Act of 2022
Originally created in 2005, the Energy Policy Act is now part of the Inflation Reduction Act of 2022 and offers homeowners and business owners a credit on their annual tax returns of 30% worth of the project’s cost during the year of installation. This credit total includes costs associated with products, enhancements and services associated with connecting to renewable energy. In other words, the total cost of the project with panels, inverters, battery storage, assembly and installation, inspections and sales tax are all covered in the credit with no maximum.
What does that mean exactly? Let’s explore with a hypothetical installation. You meet with Solcium Solar and we collaborate on the best system size to offset your monthly electrical consumption. You now own your power, reducing your monthly bill. But wait, there’s more! After installation, you can qualify to apply the cost of your system to your tax bill as well. Let’s say you went with a $10,000-sized system. You now have $3,000 in credits applicable to your annual tax liability. In addition, if you owe less than your credit amount, remaining credits can be rolled over to the next tax year.
The U.S. Office of Energy Efficiency and Renewable Energy states the following on their webpage:
This is a nonrefundable tax credit, which means you will not get a tax refund for the amount of the tax credit that exceeds your tax liability. Homeowners may get a tax refund at the end of the year due to the tax credit, if the reduction in tax liability means there was overpayment during the year. This can often occur when employers deduct taxes for employees over the course of the year. However, such refund is still limited by the taxpayer’s total tax liability. However, you can carry over any unused amount of tax credit to the next tax year.
We may be the solar experts but we don’t claim to be the tax experts. Solcium Solar encourages each homeowner to loop in their accountant to ensure eligibility and qualifications to determine what your credit total would be. Solcium Solar is dedicated to collaborating with you and your accountant during that process.
How do you qualify for the Federal Solar Tax Credit?
- First step is to determine eligibility – you must own your home and pay taxes
- Your system must be installed within the United States and is newly installed
- You must own your solar system (meaning you purchased outright or financed it, no lease or power purchase agreement)
- Inform whoever prepares your taxes that you went solar so they can:
- Fill out the IRS Form 5695
- Add your system total to your 1040
Want even more back from Uncle Sam? Well, then we have electrifying news! Drive the tax credits home by adding the purchase of your electric vehicle to the mix. The Internal Revenue Service recently added EVs to the list of eco-conscious purchases that qualify under the Inflation Reduction Act of 2022. Savvy drivers can claim up to $7,500 for electric vehicles purchased between the years 2023 to 2032.
Of course you’ll need a proper place to plug in that vehicle. By adding an EV charging station with your solar project from Solcium Solar, you’ll increase the total credits towards your tax liability, revving up the cash flow from Uncle Sam. That’s what we call taking charge of your taxes!
Let us help you make taxes great again with a free, no-hassle consultation. We’ll explore ways to save you money – both monthly and on your annual taxes!