Am I eligible to claim the solar tax credit if I lease the system or have a PPA?
Unfortunately, you have to have purchased your solar power system in order to be eligible for the tax credit. In the event of a solar lease or power purchase agreement (PPA), it would be the third-party owner who claims the credit. You are still eligible if you purchase your solar power system using a solar loan.
I don’t owe any taxes this year. Can I still claim the tax credit?
The important distinction here is that it’s a tax credit, not a deduction, so it is meant only to be subtracted from your total tax liability. The IRS is not going to pay you the X number of dollars you’re eligible for through the credit. You can, however, rollover the unused portion of your credit to the following year. For example, if your total tax liability in the first year you have the system is $3,000, but you’re eligible for a $6,000 credit, you’d have $3,000 worth of credit rolled over to the next year to offset any future liability.
When am I officially eligible to claim the solar tax credit?
This is probably the biggest hangup for homeowners looking to claim the tax credit. You’re claiming the credit for the year that the system was approved and installed, which is not necessarily the same as when you first made a payment. A good rule of thumb is to treat the date on which your system was brought online and interconnected to the grid as your ‘start date.’
Can I use the 30% federal Investment Tax Credit for things other than solar panels?
Absolutely! You can use the same credit for a variety of other energy-related investments like fuel cells, small wind turbines, solar thermal applications, and geothermal heat pumps. As long as it’s a device used for a purpose other than strictly pool heating.
I heard the solar tax credit is expiring. Is this going to affect me at all?
The federal ITC was originally established by the Energy Policy Act of 2005 and was set to expire at the end of 2007. A series of extensions pushed the expiration date back to the end of 2016, but experts believed that an additional five-year extension would bring the solar industry to its full maturity. Thanks to the spending bill that Congress passed in late December 2015, the tax credit is now available to homeowners in some form through 2021. Here are the specifics:
- 2016 – 2019: The tax credit remains at 30 percent of the cost of the system. This means that in 2017, you can still get a major discounted price for your solar panel system.
- 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
- 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
- 2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.
Additionally, in previous years, owners of new solar energy systems could not claim the tax credit unless their system was operational. Now, the legislation allows them to claim it as soon as the construction of the system is complete, as long as it is operational by December 31, 2023.