Federal Solar Incentives: How Can I Save Money on Solar Panel Installation?
The cost of modern solar panels has decreased by about a hundred-fold since the late 1970s. Experts say that their price will continue to drop with even more improvements on the way.
Much thanks to these innovations, solar photovoltaic panels are becoming even more affordable.
In fact, solar energy has become one of the cheapest sources of energy today. It now often costs much less than fossil fuel energy sources.
All those should be good enough reasons for you to go solar. However, keep in mind that federal solar incentives are still available. If you qualify for the federal solar tax credit, you can save even more when installing solar panels.
On that note, we created this guide to help South Carolinians understand the FTC better. Read on to learn what it is and how it can help you tap the sun’s limitless power.
A Quick History of the Federal Solar Incentives
The federal tax credit for solar PV panels is the brainchild of the Energy Policy Act of 2005. It was this law that created the original 30% tax credit for solar panel installations. Back then, the government only planned to offer it until the end of 2006.
However, several extensions took place since then, so the 30% FTC was available until 2019. For home solar installations that begin this 2020, the tax credit offered is 26%. On the other hand, any solar construction that starts by 2021 qualifies for a 22% tax incentive.
Unless there’s a new extension, the FTC expires by 2022. There won’t be any more tax credits for home solar panels installed by January 2022 onwards.
How the Federal Solar Tax Credit for Solar Photovoltaics Work
The FTC for residential solar panels is a tax credit that you can claim on your federal income taxes. It’s a dollar-for-dollar reduction on the federal income tax you owe. So, for every $1 tax credit you get, you can deduct $1 from your owed income taxes.
Let’s say that you’ve already found a trustworthy solar company in Charleston, SC. Let’s also say that your home solar installation starts on or before December 31, 2020. In this case, you can deduct 26% off of the total cost of your solar PV system.
So, if you spend $15,000 on your solar photovoltaic installation, you can qualify for a $3,900 tax credit. In this case, you’ll owe $3,900 less on your federal income taxes by the following year. Even if you only spend $10,000 on your solar PV panels, you’d still get $2,600 in tax incentives.
Either way that 26% cap for 2020 solar installations yields a lot of savings. That’s why you should consider getting your home equipped with a system this year.
Remember: there’s a massive 4% difference between the FTC for 2020 and 2021. Although the 22% FTC is still considerable, this means you can only get up to $3,300 credits on a $15,000 installation. That’s $600 less than what you could otherwise get with the 26% incentive set to expire by the end of 2020.
Rolling Over “Unused” Tax Credits
Another great thing about the FTC is that you can “rollover” unused credits into future years. Suppose your tax liability only amounts to $2,000, but you have a total credit of $3,900. In this case, you can use the remaining $1,900 credits for the following year.
One more vital note: tax credits are different from refunds, as you need to owe taxes to qualify for the FTC. With that said, three-quarters of US households do pay federal income taxes. So, most solar PV panel owners end up qualifying for the federal solar tax credit.
Requirements to Qualify for the Federal Tax Credit for Solar PVs
Aside from meeting the deadline, you must also be the owner of the system itself. This means that if you “lease” the solar panels, you won’t qualify for the FTC. The “lessor” (the one who grants the lease) will be the one to take advantage of the tax credit.
The great news is that there are solar financing options in which you get to be the named owner. They’re like mortgages, except that you take out a loan to finance the purchase of your PV panels. So long as you keep making payments toward the solar loan, then you’ll remain the owner of the system.
Another requirement is that the solar PV system’s location is at your first or even second home in the US. This means that your vacation house in Charleston, SC, can also qualify for the tax credits.
It’s also important to ensure that the solar PV system is brand new or that you will use it for the first time. The FTC is only claimable on original installations.
Expenses Covered by the Federal Solar Tax Incentive
The solar FTC covers a huge chunk of an installation, starting with the equipment and parts. You can also claim credits for shipping, solar consulting, and professional installation fees. It can even cover the fees of the Charleston electricians you hire for the solar PV project.
Other allowable expenses include permitting service costs and permit fees. The same goes for any equipment or tools you buy or rent necessary for the installation. You can even make a claim for the smallest components, such as bolts, nuts, nails, screws, and wires.
Just remember that as a tax incentive, the FTC program requires a paper trail. So, be sure to organize all your receipts and documents, as these will serve as your proof of expenditures.
Going Solar: A Green Way to Keep More of Your “Green”
As you can see, federal solar incentives provide gigantic financial and environmental benefits. The fact that it lets you harness the power of the sun means that you can keep more of your green currency. So, as early as now, consider going solar so that you can take advantage of the 26% FTC this 2020.
If you live in Charleston, SC, please know that our team here at Boss Energy can help. Get in touch with us now so you can request a free quote on your solar PV system installation!