Tax Credit Solar Panels
Have you considered adding solar panels to your Anoka or Bloomington home? If so, you are sure to have been checking out the price of the equipment and what you need to invest to begin creating your own solar power. And the first thing that most homeowners notice is that the process is not as affordable as they thought. But thanks to the federal residential solar energy tax credit, installing solar panels on your home could be less expensive than you thought.
Understanding Tax Credits
It is crucial for taxpayers to understand that a tax credit is a dollar-for-dollar reduction in the amount of tax they will be paying. Unlike some other deductions, this credit reduces the amount of tax you owe a full dollar for each dollar of your credit.
Qualifying For The Solar Panel Tax Credit
To qualify for a tax credit, you will need to meet several criteria, including:
- Your solar panels must be purchased and installed between January 1, 2017, and the last day of 2034.
- The installation must be completed at your residence within the United States.
- You must own the solar equipment and panels. The system cannot be leased or rented from a provider.
- It must be the original installation of the solar panels. You cannot be installing used panels that were bought from a reseller or a private individual who had then installed them on another home.
How Is The Credit Calculated?
The tax credit is a specific percentage of the cost of the solar equipment that you purchased. This includes:
- Solar panels to power an attic fan, but not the cost of the fan
- Contractor labor and installation fees, including permit and inspection fees and developer fees
- Energy storage devices with a capacity of 3 kWh or larger
- Sales tax on any of the above expenses
Once you have the total you have paid for all of the eligible services and equipment, you can begin to crunch the numbers on the amount of your credit. For systems installed in 2020 or 2021, you can claim a 26% credit. However, if the system is installed in 2022 or up to the end of 2032, you can claim a 30% tax credit. And for systems installed in 2033, the percentage will drop back to 26%, while systems installed in 2034 will only get a 22% tax credit.
You will also want to investigate any state or local tax credits or incentives offered by your electricity provider for solar panel installations, as they will impact the amount of your federal tax credit.
More Helpful Tips
Taxpayers need to understand that tenants of a home can take advantage of the tax credit as well as homeowners. In addition, the credit applies to vacation homes, primary residents, and homes not connected to the grid. So there are many ways to take advantage of affordable solar energy and a tax credit for installing solar panels.
Call the solar panel experts at Lumberjack Electric at 612-236-9052 to learn more about solar panels for your home and take advantage of the tax credit.