Is solar a tax write-off?
It can be daunting to install your own solar power system, especially if you are tight on cash. Solar panels are a large investment. On average, they cost $16,000.
Home solar power systems could save you significant money over the long term. There are many tax credits and rebates available to encourage homeowners to make the switch to renewable energy. Installing a qualifying system can earn you money back at the local, state, and federal levels.
What is the Federal Solar Tax Credit?
You can get a federal tax credit for installing solar panels. This means that you will get credit on your income taxes which actually lowers your tax bill.
In 2006, the federal government created the solar Investment Tax Credit (ITC). The U.S.'s solar industry has experienced more than 10,000% growth in the past decade, with an average annual growth rate of 50% over the past 10 years. This industry has helped create hundreds of thousands of jobs and has invested billions in the U.S. Economy.
The ITC is available for solar panels that are installed in the United States.
The ITC will offer a 26% tax credit to systems that were installed between 2020-2022 and 22% for systems that were installed in 2023. Consider a 22%-26% discount when you decide whether to install solar panels.
Eligibility for the Solar Tax Credit
The ITC is available to anyone whose solar system was not used before January 1, 2006,, and December 31, 2023. The ITC expires in 2024 unless Congress renews it.
Additional requirements include:
- You must purchase the system (not lease)
- The system must be found in the United States
- The system must be installed at your primary or second U.S. home or in a community solar project.
State Solar Incentives
In addition to the federal ITC, solar incentives are offered in several states and Puerto Rico to encourage homeowners to install solar. There are many incentives available in each state, but the most common include tax credits, rebates, and renewable energy certificates. California, Texas, Minnesota, and New York are some of the states that offer high levels of solar incentives.
Each state has its own set and they vary in terms of the solar incentives it offers. You will find different incentives for solar financing from different agencies. For more information, talk to your installer.
State tax credit
The state tax credits work the same as the federal ITC but for your state taxes. They don't reduce federal tax credits and the exact amounts can vary from one state or another.