In 2005 the ITC was created and offered a 30% tax credit. This tax credit is also known as the federal solar tax credit, IRS solar tax credit, or simply solar ITC (Investment Tax Credit).
Now, in 2022 this federal solar tax credit offers homeowners a 26% credit when they’ve installed solar panels.
This tax credit will decrease another 4% to 22% in 2023 and expire altogether in 2024. This means that the value of the ITC in 2022 makes this year an ideal time to invest in implementing renewable energy solutions for your home.
This is a federal tax credit, not a refund. It’s also applicable to all states. Expect to see the tax credit applied to your taxes (if you owe federal taxes for the year). Be sure to check with your tax professional for your situation.
The Numbers for Solar
Here is a breakdown of the typical costs of a solar solution and what you will qualify to save just in the solar tax credit alone, not including the long-term utility savings:
The typical cost of installing solar panels on your home(s):
- Average Solar Panel Cost: $15,000 – $25,000
- Solar Investment Tax Credit at 26%: $3,900 – $6,500
How to Qualify for the Solar Tax Credit
To qualify for the Solar Tax Credit, the solar panels must be purchased, not leased. If you are leasing your solar energy system, the company that owns it is the one that can claim the ITC.
Summary of Solar ITC Requirements
- The installation of your solar panel system occurs between January 1, 2006 and December 31, 2023.
- It is a new solar energy system, not one that was already installed on your property.
- Your solar panel system is owned by you, not leased.
- You did not sign a power purchase agreement.
- You invested in a community solar project, and the generated energy is credited against your electricity usage and does not exceed it.
How to Apply for the Solar Tax Credit
Save all receipts related to your solar energy system purchase. To file for the solar tax credit in 2022, you simply have to fill out IRS form 5695
Watch these YouTube videos that offer instructions on filling out form 5695.
In summary, 2022 is a good year to look into your solar options and get the most savings by qualifying for the IRS solar tax credit and taking advantage of the current percentage plus the residual savings.
Have more questions? Contact us to see how simple it is to switch to renewable energy and make an impact on your savings while also contributing to the economy and the environment.