Are you thinking about going solar, but you’re unsure of the cost? Did you know you can recoup up to 30% of your purchase and installation costs with a solar tax credit from the federal government?
Solar tax credits were initially set to expire at the end of 2016, but Congress extended some provisions into 2017 and beyond with the Consolidated Appropriations Act. This law allows taxpayers to take advantage of the solar rebates for photovoltaics and solar water heaters through 2021.
Here’s what you need to know to take advantage of the tax credit.
How Does The Federal Solar Tax Credit Work?
The federal solar tax credit gives you a 30% rebate on the purchase and installation of solar electric or solar water heater systems. There’s no cap on the credit, meaning you can get a rebate on any qualifying solar system, regardless of its cost.
This one-time tax credit works for any home as long as you own the property and use it as a residence. There’s no stipulation on how much time you spend in a home, so you can get a solar tax credit for your second home. The solar rebate does not, however, apply to rentals.
Rooftop solar systems are the most common way to take advantage of the rebates, but you must own the solar panels. If you lease or enter a power purchase agreement for free solar panels or lower upfront costs, the tax savings go to the installer.
Solar water heaters also qualify for a tax credit as long as they heat at least half of the water used at home. While there are plenty of reasons to use the sun’s energy to heat your swimming pool or hot tub, the incentive doesn’t apply for these.
Solar rebates for other renewable technologies like geothermal heat pumps, wind energy systems, and hydrogen fuel cell projects expired at the end of 2016.
Solar Tax Credit: How Much Will I Get?
When Congress extended the solar rebates through the end of 2021, they set the tax credits to phase out over the coming years instead of end abruptly.
The current 30% is valid through the end of 2019, and it will decrease each year thereafter. Here’s the full schedule:
- If you install a solar system before Dec. 31, 2019, your tax credit is 30%
- If you install a solar system in 2020, your tax credit is 26%
- If you install a tax credit in 2021, your tax credit is 22%
- Dec. 31, 2021 is the end of the program unless Congress extends the deadline.
If you’ve been thinking about going solar, there’s no better time than the present. You’ll save money on your electric bill and increase the value of your home, with the added benefit of working to save the environment.
If you’re ready to go solar, find out how much money you can save.