Congratulations! You finally got solar on your home and now is the moment you have been waiting for. . . getting your 30% Investment Tax Credit (Solar ITC.)
If you have NOT added solar to your home or business yet, this is a great way to understand the simple process that will cut 30% off the initial cost of getting your solar PV system installed and running.
But, how do you get that 30% back in cash? What form do you use? Where do you send the form? Don’t worry, the process is simple and we have included the simple basics here along with links to the actual fillable IRS Forms you will need.
The 30% Solar Tax Credit is a powerful asset that can significantly reduce the overall system cost of your solar. The ITC works for both homeowners and business owners who have decided to start saving on their utility costs with solar.
ONLY for Owners of Solar!
If you Lease your Solar PV, or have a PPA Agreement you CANNOT claim a 30% Tax Credit. The solar must be on your primary residence, not a vacation, or second home.
Commercial Businesses, and Commercial Residential Income Property (like an apartment building) do qualify for the 30% Tax Credit. For Commercial Business the correct IRS Form to use is the 3468 Investment Credit From. Commercial Business taxes can be complex at best! Make sure to have a qualified tax professional assist you in claiming your COMMERCIAL 30% ITC
Remember: It is critical to get solar in 2018 as the ITC will begin to step-down to lower, and lower credit percentages. Waiting will absolutely cost you more in the future! Make sure to tell your family and friends too. Many people are on-the-fence about deciding to get solar until they find out it will cost more in the very near future.
What You Need to Claim Your Tax Credit
- The receipts for your solar installation – OR receipts for your Solar Water Heating System, Small Wind Energy, or Geothermal Heat Pumps. (All of these renewable energy systems qualify for the 30% ITC.)
- IRS Form 1040
- IRS Form 5695 for RESIDENTIAL (Plus Instructions)
- A pencil and a calculator
The Qualified Solar Installation Cost
Remember! Qualified solar electric costs are ALL costs for the installation on your home located in the United States. ALL costs relating to adding the solar will qualify because the property constitutes a structural component of the structure on which it is installed.
Make sure to Include any costs needed for site preparation: such as cutting down trees, trimming back trees, removing hedges, fixing the roof, adding an additional phone line for monitoring, and for trenching, or tunneling to get the solar wiring connected to your electric meter.
Final Warning on Rebates!
Remember that any local utility rebates, or local city rebates HAVE to be deducted from the Total Qualified Solar Electric Costs. DO NOT have to deduct STATE TAX CREDITS. The State Tax Credits are calculated from the Total Qualified Solar Electric Costs minus only rebates!
LINE 6 – The Simple Math of 30%
Does it get easier than this? Simply calculate 30% of your total cost of ALL installation expenses and you are almost completed!
LINE 14 – Limitation Based on Tax Liability. Enter the amount from the Residential Energy Efficient Property Credit Limit Worksheet.
This can be a bit tricky as it requires you to know any additional tax liabilities you have for such things like: Claiming tax credits for adoption expenses, or interest on a mortgage, or buying a home for the first time, or even the tax liability for buying a plug-in hybrid or electric vehicle. Best to use the INSTRUCTIONS for Form 5695 and the chart on page 4 for this.
Finishing Up – Get Your 1040 Form Ready!
Using your 1040 is the final step by adding the total Residential Energy credit from your Form 5695,, and entering the amount into line 53 of the 1040 IRS Personal Tax Form.
Rolling Over Tax Credits to the Next Year
If you don’t use all of the credit, you can carry them over to the following year BUT remember that when the ITC Steps-Down in 2019 you can ONLY claim the 26% that is designated for that year. For example: If you foolishly wait till 2019 to get solar and only use 15% of your 30% Tax Credit, then in 2020 you can ONLY get a remaining 11% Tax Credit – NOT the final 15% you were expecting in 2019.
About Saving MORE Than Money
While we get great pleasure in touting the financial benefits of solar, there are a wealth of other benefits to remember. Thousands of local jobs are the product of self-generated energy, as well as the overwhelming proof that our climate is suffering from 100 years of burning dirty fossil fuels for energy. The simple truth is you CAN both save money, and benefit the environment, and your local economy simply by taking advantage of existing tax credits and picking a simple, clean, and cost effective energy generation system for your home.