How does going solar save you money? We’ll walk you through the basics of the tax incentives for solar panels!

There are several ways solar panels save you money. In addition to raising the value of your home, solar panels on your home put energy costs at a fixed rate that isn’t subject to the fluctuations of the energy companies. You’ll also be putting money back in your pocket come tax season! This is because solar panels are so gentle on the environment, the government offers a generous tax benefit to homeowners who invest. That’s something every homeowner can get excited about! 

What are the tax incentives for solar panels and just how much can you save on your system? Let’s take a closer look at this program and just what homeowners can expect come April 15.

What is a Tax Incentive?

A tax incentive reduces the amount of money that you owe to the government. They do this to encourage citizens to participate in programs and behaviors that benefit the community. In this case, the solar panels on your home have a positive impact because they reduce your reliance on the grid. Solar panels are powered by a truly renewable energy source, so the government wants to make them economically profitable for homeowners. We’re all about it!

Originally established in 2005, the Investment Tax Credit (ITC) was initially intended to last for only two years. The solar industry in the United States has expanded rapidly since then, thanks in large part to this tax incentive. Thanks to the popularity of the program, it’s been extended several times and is now being offered through the end of 2021. It’s like you’re getting a high five from Mother Earth AND Uncle Sam! Primitive Power is super excited to be able to help homeowners qualify for this tax credit as they install solar systems on their homes. It’s one of the many great things about going solar, and we’re here to walk you through it!

What Are the Tax Incentives for Solar Panels?

The investment tax credit, also known as the federal solar tax credit, allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. This applies to both systems installed on residential and commercial properties, and there is no cap on its value. 

This means that 26{feafe3d6dc6c52950d9cef32f5fae0f2b52cab9baed02c44840e141c43600b15} of the cost of your panels is deducted from the total amount you owe in taxes at the end of the year! You need to own, not lease, your panels to qualify, and the credit can only be claimed once per system (if you buy a home that already has panels and the homeowners have received a tax credit for them, you are not eligible). 

Here’s more good news: if you don’t owe enough in taxes to claim your entire credit in one tax year, you can “roll over” the remaining credits into future years so long as the tax credit is still in effect. The sooner you act, the better! Keep in mind that this is a tax credit, not a rebate. A rebate is paid to you no matter what you owe, but a credit is deducted from the amount that you owe. If your tax credit amount is less than you’d be paying in taxes, it will have to roll over into the next year. Read more about tax breaks for solar powered homes here.

How to Claim the Investment Tax Credit

You’ll claim your solar tax credit when you file your yearly federal tax return. Let your accountant know you’ve added solar panels to your home and will be claiming the tax credit. If you’re filing your own taxes, request form 5695 and make sure it’s added onto your 1040 and you’ll be good to go! Keep in mind that we aren’t professional accountants (we’re solar experts through and through!), so be sure to contact your tax professional to get the most up to date information as you file.

How Much Can You Save On Your Home?

That depends on your solar system! Each home, location, and family is different, which is why we rely on our team of pros to make sure your home has the perfectly optimized system. Primitive Power offers free quotes and even a rendering of your home with panels on the roof (we can already tell you–they’re going to look awesome). Our solar experts can walk you through the tax incentive, and getting a quote on panels for your specific home will also tell you just how much you can expect to save with a tax credit. Contact a Primitive Power solar expert today and we’ll get to work for you!