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There’s no greater incentive for California homeowners currently considering installing a solar photovoltaic (PV) system in their homes than the Federal Solar Tax Credit. The problem is, 2019 is the last year that homeowners can take full advantage of this program. In today’s blog, Greiner will break down the basics of the Federal Solar Tax Credit in 2019, and why it’s in your best interest to act now and install solar panels for your home before the end of the year.
What is the Federal Solar Tax Credit?
The Federal Solar Tax credit is an energy Investment Tax Credit (ITC) under Section 48 of the United States Tax Code. Enacted in 2006, the ITC is a 30% tax credit on solar installations for residential and commercial properties.
The Federal Solar Tax Credit has been an incredible success—so much so that Congress passed a multi-year extension in 2015.
How Does the Federal Solar Tax Credit Work?
What does a 30% tax credit mean? Actually, it’s pretty straightforward. For residential homeowners, you simply take the total cost of your solar installation and apply 30% as a Federal Tax Credit against your personal income tax due (note: you must own the solar PV system; leasing disqualifies you from this credit).
A tax credit reduces the amount of income tax you would normally owe the government. So, if the total cost of installing a solar energy system on your home was $15,000, you could claim a $4,500 tax credit when you file your tax returns. If the cost was $30,000, you could claim $9,000. Additionally, if the amount of your credit exceeds the federal taxes you owe that year, you can apply the remaining balance to the following year’s taxes as well (though you can only rollover your balance once).
That’s all good news. The bad news is that, as part of the conditions of the 2015 extension, 2019 is the last year the tax credit will remain at 30%. Here is the schedule for 2020 on:
● 2020: 26% deduction
● 2021: 22% deduction
● 2022 and beyond: residential installation credit is eliminated; 10% deduction for commercial installations
How Do I Qualify for the Solar Tax Credit?
A small silver lining here is that your solar installation has to be underway by the end of the calendar year in order to qualify for that year’s tax credit. So, projects that begin any physical work by the end of December 2019 will still qualify for the 30% credit. But from 2020 on, the credit percentage will decrease, year-by-year, until it disappears entirely for residential homeowners.
To qualify, you’ll simply need to hold on to your receipts and paperwork related to installation costs, and fill out the necessary paperwork come tax return season. You can do this yourself, though we recommend working with a qualified accountant to ensure you’re filing correctly. Please note while the contractors at Greiner are expert solar installers, we are not tax professionals and you should contact your tax consultant for more details.
Greiner Makes Solar Installation Easy (and Saves You Money!)
The Federal Solar Tax Credit is just one of the incentives available to homeowners considering the switch to renewable energy. In California, utility companies are required to offer net metering to residents, meaning you can sell the excess electricity produced by your solar panels back to the utility company for credit. In addition to the tax credit, PACE financing allows homeowners to spread out the cost of solar panel installation over as long as 30 years, as a line item on their property taxes.
The bottom line is, if you’re interested in installing a residential solar system in your Davis, Dixon, or Vacaville home and want to take full advantage of the Federal Solar Tax Credit, 2019 is the year to do it. With less than half the year remaining, there’s no better time than today to give the experienced solar experts at Greiner Heating and Air Conditioning a call.