Can You Still Get Tax Breaks For Installing A Solar Energy System?

The demand for clean and renewable energy solutions has steadily risen in recent years, with solar energy emerging as a popular choice. For many, it generates not only ecological benefits, but also financial ones in the shape of tax incentives. Learn about the current tax breaks available for solar energy system installations here.

The Solar Investment Tax Credit (ITC): A Primer

  • Residential Solar Investment Tax Credit – Homeowners installing solar energy on their primary or secondary residences can potentially benefit from the residential ITC, reducing their federal tax liability. The credit is calculated as a percentage of the cost of the solar energy system after rebates and discounts have been taken into account.
  • Commercial Solar Investment Tax Credit – Similarly, companies installing this energy system on their commercial property can reap the benefits of the commercial ITC, which also grants a federal tax credit based on a percentage of the system’s cost.

Factors Affecting Solar Investment Tax Credit Availability

  • Phase-Out of Federal Solar Investment Tax Credit – The ITC has been subject to a phase-out plan, with the federal tax credit percentage steadily decreasing over time for both residential and commercial installations. Consequently, the benefits derived from the ITC may not be as impactful compared to previous years. Nevertheless, the credit still provides a significant financial incentive for those considering investing in them.
  • Eligibility Requirements – To take advantage of tax breaks, specific eligibility requirements must be met. Property owners must ensure that their solar energy installation meets the necessary federal, state, and local regulations. Furthermore, it is crucial to verify the ownership of this energy system as the property owner, as leasing a solar array from a third-party company means that the leasing entity typically claims the available tax benefits instead.
  • State and Local Tax Incentives – While the ITC remains a significant incentive for solar installations, it is essential not to overlook potential state, local, and utility tax incentives that can help lower overall system costs. These incentives vary by region and can include property tax exemptions, sales tax exemptions, and state tax credits.

Steps to Claim Solar Energy System Tax Credits

  • Consult with Professionals – Collaborating with professional tax consultants and solar installation companies can ensure the seamless claiming of tax benefits. Their expert guidance can help navigate the complex process of eligibility determination and compliance with regulations, ensuring a successful experience.
  • Maintain Accurate Records and Documentation – Lastly, starting from obtaining necessary permits to keeping track of invoices and purchase receipts, maintaining accurate records and documentation is crucial for substantiating tax credit claims.