Solar Tax Credit
How does solar benefit me? Is solar an investment? What will I get out of installing solar in my home? These are all common questions we get from potential customers inquiring about solar panels for their home, and we get it! Solar can seem like a big investment, and it is, but we’re here to explain to you why now is the best time ever to install your solar system in your home due to specific federal tax credits.
For starters, there is a sales tax incentive which exempts the customer from sales tax on their solar panel system. This is put in place to help reduce upfront costs that can occur when installing a solar system. In the United States there are 25 states that honor this sales tax incentive. This incentive includes Washington state, where you are eligible for 100% coverage up to 10kW of solar panels.
There are 37 states that also offer property tax incentives which reduces the tax bills that property owners would have to pay if that value of their property included their solar systems which would ultimately increase the tax basis of their homes. All in all, this just ensures that you don’t pay increased taxes when your solar system increases your property value. This incentive isn’t currently offered in Washington state but is a great perk for those it applies to.
Another big benefit of installing solar in your home is the federal solar tax credit that can be claimed on federal income taxes for a percentage of the cost of the solar PV system installed. A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. In order to utilize this tax credit the solar system must be placed during the tax year, before December 31st of the year and generate energy for a home inside the United States. All homeowners who pay taxes can qualify for the tax credit when they install solar panels on a home they own, even if this property isn’t their main home. In 2021 the federal tax credit will stand at 22% for residential solar systems, and in 2022 the federal solar tax credit will only be available for commercial installations at a rate of 10%, which will subsequently exclude all residential systems from being eligible for this tax exemption.
Although the federal tax credit for solar has been in the works since 2005 and the government granted an extension through 2016, it’s best to take advantage of the 22% rate as soon as possible. Every year the percentage of federal solar tax credit decreases and to decide to wait until after 2021 is choosing to rely on the government to extend the spending bill for this act, which is not guaranteed. This means that now is truly the perfect time to install solar in your home if you’ve ever been interested in reducing your home’s energy bill or had the desire to create your own independent energy source.
