In order to incentivize people to move to renewable energy sources such as solar energy, the United States
government has a tax credit that home owners and business owners can take advantage of. The solar federal tax
credit was created by the Energy Policy Act of 2005. It was supposed to expire at the end of 2017, but Congress
extended its expiration date. This federal tax credit enables home owners and business owners in the United
States to save 30% on the installation cost of their solar energy systems.
Under the current plan, the solar federal tax credit will drop from 30% to 26% on January 1 st , 2020. This means
that those who decide to install a solar system in their home or commercial property will get 26% off the cost of
the system instead of the current 30%.
In 2021, it’s scheduled to drop even further. Those who decide to go solar in 2021 will receive a 22% credit on
their taxes. In 2022, there will be a further reduction, down to 10%. One important note about this – the 10% tax
credit will apply to commercial properties only. That being said, if the plan stays in tact as it is currently structured,
there will be no tax credit for residential solar in 2022.
How to Claim The Solar Federal Tax Credit
In order to claim the solar federal tax credit, you need to apply for it when you file your annual tax return. Keep in
mind that if you’re leasing the solar system, technically you do not own the system so you are not eligible for the
solar federal tax credit. Please note we are not tax consultants – please reach out to your CPA in regards to all of
the details of this federal tax credit program.
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