08 Oct Hurry! Solar Tax Credits Are Fading Fast
If you’ve heard about the savings that switching to solar provides to homeowners here in Nevada, you’ve probably heard about the benefits you can see on your taxes after your solar installation is complete. But you may be wondering, “What’s the hurry?”
Sorry to break it to you, but we have some bad news. The federal tax credit that offers significant savings on your taxes when installing solar panels on your home is dropping to 22% in 2021 and will ultimately end for homeowners by 2022! But don’t panic, there’s still some time to secure your tax credit.
The Final Year of the Solar Tax Credit
The federal solar tax credit, also known as the solar investment tax credit (ITC), allows you to deduct a percentage of the cost of installing a solar energy system from your federal taxes. The tax credit was first implemented in 2006 and has helped solar energy to grow more than 10,000% since it was enacted. Currently, in 2020, homeowners can receive a 26% tax credit, but that’s being reduced to only 22% next year.
Here’s a breakdown of the investment tax credit changes over the years:
- 2019: 30% tax credit for residential and commercial.
- 2020: Tax credit reduced to 26% for residential and commercial.
- 2021: Tax credit reduced to 22% for residential and commercial.
- 2022 onwards: Tax credit reduced to 0% for residential. Commercial will remain at 10%.
So, what does that mean for you, a humble homeowner? It means that as of October 2020, you have 90 days to get your 26% tax credit and only 15 months until tax credits are gone forever! That is unless Congress decides to step in and renew the tax credit once again, but we’re not holding our breath. You wouldn’t want to miss out on getting a tax credit for a sleek new Panasonic solar system, would you?
How to Receive Your Solar Tax Credit
Now that you’ve learned that solar tax credits are going to disappear, you may be wondering how exactly you can take advantage of the Federal ITC, and honestly, it’s pretty easy! First, of course, you’ll need to have your solar system installed, and luckily for you, residential solar installation is what we do here at Sol-Up. Once the installation is complete, you’ll simply need to gather up all the receipts from your solar installation and add them up to calculate the total. You can deduct 26% of that total from what you owe in federal taxes in April.
When filing your taxes, you’ll need to fill out IRS form 5695 in addition to the usual form 1040. But suppose your solar installation isn’t completed by the end of 2020. In that case, the deduction drops down to 22% for the year 2021, and after that, only commercial solar installations will qualify for a tax credit. Also important to note: if you sign a lease or PPA with a solar installer, you’re not the owner of the system, and won’t be eligible to receive the tax credit.
So how much money would you be losing out on if you waited to install solar panels until 2021? Let’s run the numbers!
Crunching the Numbers on the Solar Tax Credit
Let’s say you spend a total of $30,000 on your solar installation in 2020. When it’s time to do your taxes next year, you’ll be able to deduct $7,800 (26%) from what you owe Uncle Sam. If that $7,800 is more than what you owe in taxes, then the remainder will roll over into your 2021 taxes. However, if you were to wait and start your installation in 2021, that deduction would drop from $7,800 to $6,900 (22%) — a difference of $900! And if you were to wait even longer, for 2022, you’ll get nothing! Zero, zilch, nada!
*These numbers don’t include any additional financial incentives offered by NV Energy, SREC’s, or manufacturer rebates.
Get the Most out of Your Solar Panels with Sol-Up
When it comes to solar installation here in Nevada, it’s essential to trust a solar contractor that offers full service, from start to finish. At Sol-Up, we’ll meet with you to discuss your energy goals for your residential solar system, design a solar array just for you, and install it with precision and care. We’ll also make sure you receive any financial incentives along the way. That’s what you can expect from us, the only Panasonic Elite Installer in Nevada.
Our team has you covered from beginning to end, so don’t wait for the federal investment tax credit to end before you schedule your solar installation. Contact Sol-Up today!