Solar energy was once a remote, futuristic technology, far removed from the world of residential power.
But these days, every homeowner can participate in this revolution, and shave some money off their taxes while doing so.
The upfront cost of solar installation can be hefty, but the federal solar tax credit 2022 can offset that expense. Keep reading to learn more about this incentive and whether you can take advantage of it.
What Is the Federal Solar Tax Credit 2022?
First, let’s take a look at solar tax credits and how they work.
The federal solar tax credit 2022 is part of an ongoing federal tax credit scheme. In short, it’s a tax credit that any homeowner can claim on their federal returns.
It isn’t valued in any dollar amount, but is figured as a percentage of what a homeowner spent to install solar photovoltaic (PV) panels. At present, that tax credit amounts to 26% of a residential system’s cost.
The way solar tax credits work is simple: you use them to offset the amount owed on income tax returns. In other words, if a homeowner were to claim $2,000 in solar tax credits, then the total owed in income taxes would decrease by that amount.
There are certain parameters that must be adhered to in order to claim the credit. For instance, the system must be installed and producing electricity during the current tax year.
Congress passed an extension of the Investment Tax Credit in December of 2020. Under the provisions of this extension, the tax credit amounts to 26% for solar panels installed in 2020-2022, reducing to 22% for panels installed in 2023.
Unless it is further extended by Congress, the tax credit is slated to expire in 2024.
Who Is Eligible to Claim the Federal Solar Tax Credit?
Here’s a look at who’s eligible to participate in this federal tax credit scheme.
There are quite a few criteria to qualify. First of all, you’ll have to have a solar energy system installed and operating in your residence sometime between January 1, 2006 and December 31, 2023.
For instance, if you live in the Cincinnati area, you can save with Blue Raven when installing your solar panels. The important thing is that the solar energy system is installed and running in a homeowner’s primary or secondary residence before the tax credits expire.
Also, the homeowner must own or be financing the system. Those who are leasing their systems are ineligible for the tax credit. And finally, the system must be new and in use for the first time, as the credit can only be claimed one time for its initial installation.
How to Claim Solar Tax Credits
There’s not much to claiming the federal solar tax credit.
All that a homeowner must do is fill out IRS Form 5695, and submit this alongside the annual tax return. All instructions for completing this form can easily be found on the IRS site. Or, if preferred, a tax professional can help in filling out and submitting the form.
Make the Most of Solar Tax Credits
If you’re thinking about upgrading your residence to solar power, you’ll want to take advantage of the federal solar tax credit 2022. It’s designed to incentivize the adoption of cleaner, renewable energy tech, so why not use it?
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