If you’re reading this, I assume you’re interested in solar energy. Not only is it one of the most successful environmental movements of all time, but it also offers some amazing tax benefits to help put the spring in your step.
We’ll run down the basics of the solar energy credit here. After reading, if you’re thinking about doing some research on your own, be sure to check out our solar energy hub for more information. And if you’re looking for a quick primer on solar energy, check out our Solar Tour of America video to see the nation’s majestic solar installations in action.
What Is It?
The solar energy credit was established under the American Recovery and Reinvestment Act of 2009 to help fuel America’s transition to a more sustainable energy future. The legislation provided a 50% increase in the solar energy credit, allowing individuals and businesses to claim a tax credit of up to $15,000 for installing solar panels in 2020.
Put simply, the solar energy credit is a tax credit that allows you to make a tax-deductible payment to a third party (typically a solar energy company) to fund the cost of installing solar panels on your roof.
The credit was established to help offset the increasing cost of oil and the declining value of the dollar. And although prices for solar panels have come down substantially, the cost of installation has not, meaning that the credit has real value today especially if you’re looking to claim it.
How Do I Claim It?
To claim the credit, you first need to set up an account with the solar energy company of your choice. Then, you’ll have to sign a contract to purchase solar panels. Finally, you’ll need to install the panels on your roof and register them with the government to claim the credit.
As you can imagine, setting up an account with an energy provider to claim the tax credit is rather cumbersome. So, if you’re using the IRS form 5695, you’ll need to enter a variety of personal information about yourself, along with the account number of the credit card used to make the purchase. In most cases, you’ll also need to provide a utility bill as proof of payment.
If you’re looking to claim the credit as a business, you’ll need to set up a new account with a different credit card. And don’t forget: you’ll need to file a corporate tax return in the year you claim the credit, even if you aren’t required to.
When Does It Expire?
The good news is that the solar energy credit has a built-in expiration date of 2025. This means that you have until April 30, 2025, to install solar panels and claim the tax credit. After that, it’s gone.
You also need to keep in mind that the credit is worth what it is today, and there’s no telling what the value of the dollar will be in 2025. This means that if you install solar panels now, you could end up with a bigger tax refund than you expect. However, if you wait until after April 2025 to claim the credit, you’ll be stuck with whatever price the energy providers are offering in contracts at that time.
Why Should I Claim It?
If you’re reading this, you’re probably wondering why you should claim the solar energy credit. After all, you’re not running a solar-related business, and you didn’t really pay anything for the solar panels.
The reason you should claim the credit is because, even though you didn’t really pay for the equipment, you did improve your home’s energy efficiency, which is great for the environment. This means that you not only receive a tax credit, but you’re also helping to support green energy initiatives.
If you set up a simple spreadsheet to track your tax credits, you’ll see that the credit works out to about $0.16 per watt of installed capacity. This means that for every watt of solar power you install, you’ll receive a $0.16 tax credit. While this might not seem like much, if you’re looking to install a significant amount of solar equipment, the $0.16 per watt will add up quickly.
If you’re interested in pursuing this tax credit, be sure to contact your local solar installer. They can help you claim the credit and, if necessary, even help with the installation. Just make sure that you follow the right procedures to ensure that you receive the full benefit of this unique incentive.