Installing solar power is one of the best contributions you can make to a sustainable future, and it’s also an excellent way to minimize your energy bills. Homeowners can even save up to 30% on the installation itself through solar tax credits.
However, many homeowners aren’t familiar with how the solar tax credit works and the other rebates or incentive programs they may qualify for. This blog will provide a full overview of everything you need to know to save money when adopting solar. It covers:
- What are solar tax credits?
- How much can homeowners save?
- How to qualify for solar tax credits
- Maximize your savings with solar tax credits
Keep reading to learn how you can save money while reducing your grid reliance.
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What Are Solar Tax Credits?
Solar tax credits are part of the federal solar tax credit known as the Investment Tax Credit. The ITC’s name reflects its goal of encouraging homeowners to invest in home solar power. To accomplish this, it offers a 30% federal tax credit on eligible solar systems installed between 2022 and 2032.
Tax credits reduce the taxes you owe to the federal government at the end of the financial year. So, if you owe $10,000 in taxes but receive a $5,000 solar tax credit, this would bring the total amount owed down to $5,000.
How Much Can Homeowners Save?
Solar tax credits are one of the best benefits of solar power because they cut the opportunity cost of installing a system that can reduce your energy bills for decades to come. Fortunately, there’s no maximum claim amount on the ITC, so whether your solar panels cost $10,000 or $40,000, the benefit will scale to match.
On average, installation of a 5-kilowatt solar system costs about $18,000 in California. Of course, this depends largely on the brand of the panels and whether you want add-ons like a home battery system. At this average price, you’d stand to save $5,400 on your tax liability at the end of the financial year.
As a bonus, federal tax credits also apply to battery storage systems with a 3 kilowatt-hour or greater capacity when installed with your solar panels, so you’ll get an additional 30% tax credit on these systems. This helps tilt the advantages and disadvantages of solar more in favor of its advantages, ensuring a readily available electricity supply at all times.
In addition to these federal tax credits, California residents may also qualify for other incentives, including the California Self-Generation Incentive Program, Property Assessed Clean Energy (PACE) financing programs, and California net metering incentives. All of these provide benefits for homeowners who install solar panels on their residential property.
How to Qualify for Solar Tax Credits
For homeowners to qualify for the full 30% tax credit from the ITC, a solar system must be installed between 2022 and 2032. However, the credit also applies to systems installed from 2019 onwards, at slightly reduced percentages after 2019. It’s possible to amend tax returns for up to 3 years to retroactively apply the credit, but it’s best to speak to a qualified tax professional before doing this.
To qualify for a solar tax credit, you must also:
- Install a brand-new system that will be active within the current credit period
- Own the solar system outright or through financing (but not via lease)
If you buy a property that includes an existing solar system, you can’t gain a tax credit, even if the system was installed during the credit period and hasn’t been claimed by the previous owner. You can also only fully benefit from a tax credit if your tax liability matches or exceeds the credit since any difference won’t carry over to the next year.
Maximize Your Savings With Solar Tax Credits
Solar tax credits and other incentive programs offer an ideal way to invest in new solar panels, whether you’re trying to fit the panels into your budget or simply want to get a better deal on higher-capacity systems. Unsure whether you’re eligible or want to know more about how much you can save? Speak to a professional installer like Celestial Solar for personalized guidance.
Maximize Your Solar Savings! Call Celestial Solar & Water Systems Now!
Find out how much you can save on solar electric panels today with Celestial Solar in California, Arizona, Nevada, and Florida. Our factory-trained technicians can talk you through all costs and help you get the most value from the solar tax credit and other relevant rebates.
