How The Federal Solar Tax Credit Works in 2021 & 2022
As we move forward the tax credits given by the federal government for clean energy are becoming increasingly consumer incentivized. The tax credit is given in a percentage and the dollar value can be calculated by knowing the total solar system dollar amount and multiplying it by this years tax credit percentage. As of 2022 there's a 26% federal tax credit. In 2023 the tax credit is scheduled to increase to 30% due to recent changes in government policy. Thereafter it is scheduled to incrementally decline year to year.
The tax credit is a dollar-for-dollar credit towards any homeowners federal liability. In order to claim the credit the homeowner will file form 5695 with their federal taxes (form link). If one is unable to claim the entire tax credit their first year, they can claim the remainder for a total of 5 years. If you have federal tax liability whether it be taxes taken out of your paycheck throughout the year or taxes you pay at the end of the year as a business owner, you can deduct that amount from the taxes you owe and put it toward the value of your solar system.
Government Switch to Renewable Energy
On August 16th 2022 the federal government passed a $700 billion bill to curb fossil fuels and increase clean energy usage throughout the United States. (Link) Some areas of the country are requiring newly built homes to have solar capabilities. The United States is now seeing some of the largest investments in government history being directed towards clean energy. Solar power along with other types of clean energy are now becoming focal points of the future. It is very possible to see increases is fossil fuels and natural gas prices as the government incentivizes homeowners to move toward clean energy. Our clients are receiving tax credits that range from $1,000 to $50,000. The tax credit can be used to spend however a homeowner wants, but most homeowners put the credit toward the cost of their solar system.
Roofing Upgrades
People often require a new roof prior to their solar installation. The federal tax credit includes a reroof as well. The total tax credit will increase proportionally if a homeowner decides to replace their roof at the same time they install solar.
Disclaimer
Please consult your local tax professional regarding tax inquiries. We are not tax professionals.