If you’re looking to add solar panels to your home, then you’re in luck. Thanks to numerous government programs, now is one of the best times to save money on both the installation and the regular use. How does this all work and how much money could you realistically save? While this depends on where you live and the overall cost of your system, you could qualify for some pretty significant savings. Here is your guide to residential solar tax savings for 2022.
What is the Federal Solar Tax Credit?
The federal solar energy credit is a specific tax credit that you can claim on your federal income tax. While the plan has been around for a few years, it was extended in December 2020. This extended the amount of the tax credit to 26% of installation costs for systems completed between 2020 to 2022. In 2023, the credit dropped to 24%. Previously, homeowners could claim 30% of solar installation costs on their taxes at the end of the year.
How Does a Tax Credit Work?
A tax credit does not mean that the government instantly writes you a check for a portion of the cost of your solar installation. Instead, the process means deducting from a portion of the overall income tax you owe. In some cases, this could mean enjoying a pretty hefty rebate after you file. However, it is always a good idea to discuss any tax rebates or topics with your preferred accountant.
Who is Eligible for a Solar Tax Credit?
While there are special incentives for commercial building owners and landlords, this guide is specific to owner-occupied properties. For residential homeowners, you’re able to claim the federal solar credit in the same year in which installation was completed—but there are a few stipulations. You must actually own the property and cannot be renting or leasing. Your name must also be on the property deed and you must purchase your panels outright. At this time, leased panels are not considered acceptable to claim the tax credit.
What Other Incentives Are Available for Installing Residential Solar?
In addition to claiming the residential solar tax credit on your federal income taxes, there are other financial incentives you might have access to. For example, many states are offering special tax breaks for homeowners who install solar within a specified period of time. And several energy providers offer rebates to customers who switch to solar by a certain date. To find out if you qualify for any of these savings, it is important to ask your local solar installation company about the process.
Wrap Up: Solar Tax Savings 2022
If you’re looking at taking advantage of solar tax savings, you’ll want to act soon. The credit is expected to expire in 2024 and there are no current plans by Congress to extend it further. Granted, there’s still a couple of years for them to do so, but the chances of a higher percentage if it does go longer are highly unlikely.