Both homeowners and commercial operations will receive a federal tax credit for 30% of the total system cost.
This tax credit can help you take a significant amount off the cost of your system. A tax credit reduces the amount of your tax liability, unlike a tax deduction, which reduces the amount of your taxable income (see the video below).
- For example, if you owe $3,000 in taxes and you have a tax credit of $1000, then you would only owe $2000. If you owe $500 in taxes and you have a tax credit of $1000, then the $500 would be paid and the additional $500 would roll over to the following year.
- Let’s say you get a $1,000 tax refund every year when you do your taxes. Will you be eligible for the Solar Tax Credit? Very likely, yes! This doesn’t mean you don’t pay taxes to the Federal Government, it just means that they withheld more than than what you owe in a particular year. If you take the Solar Tax Credit, it will decrease what you owe to the Federal Government by 30% of your solar project cost. This means that you will probably get a larger tax refund the year you do solar.
- The federal tax credit will be available at 30% until December 31st of 2019, after which it will begin to step down. Only homeowners and business owners who pay taxes are eligible for a tax credit.
You can figure out and claim your federal tax credit by using Form 5695. This form can also be used to carry over the credit from a previous year. Here is an excellent resource on the Federal Tax Credit.