When it comes to saving money on your taxes, sometimes there are programs you may not realize that are designed to do all of that and more. Going solar is one of them, and it’s a great way to save money on your taxes and reduce your heating, cooling, and electricity costs each month.
Going solar can be one of the best investments you make this year, and not just because you get tax breaks because of it! Here at Maggi Tax, we’re always on the lookout for new ways you can make the most of your tax breaks every year and save money each month as best you can.
Today, we wanted to spend a little time diving into how going solar can get you a tax break, how it works, what it covers, and how to know if you’re eligible for the Federal Solar Tax Credit. This way, you can better understand your options before investing in solar on every property you own!
What is the Federal Solar Tax Credit?
This tax credit is one that you can claim on your federal tax returns to get credit for a percentage of what you spend on installing a residential solar photovoltaic system. And while it’s not valued at a fixed dollar amount, it still works out to 26% of your total system cost, for which you get a federal tax credit.
If you are a U.S. homeowner, you can claim this credit on your taxes as long as you install the PV system on a residential location based in the United States, and it doesn’t have to be your primary residence either!
But the system must be installed and in service or “turned on” during the tax year that you’re claiming the credit for. So, if you install the system in December of this year, but don’t turn it on and have it up and running until January of 2022, then you can’t claim the credit until your 2022 filing.
What Does the Credit Cover?
You can claim a federal solar tax credit of 26% of the following costs if you install and use a solar PV system in your home.
- Cost of solar panels.
- Labor costs for the installation of the solar panels, including fees related to permitting and inspections.
- All additional solar equipment such as wiring, inverters, and mounting hardware.
- Energy storage devices are powered exclusively through solar panels, and this includes solar batteries.
- Any sales taxes paid for eligible solar installation expenses.
Am I Eligible?
To be able to claim the federal solar tax credit and get that money back on your investment, you must meet the following criteria when you file your 2021 tax return:
- Your solar PV system has been installed and operational between January 1, 2006, and December 31 of this year.
- Your system is installed at your primary or secondary residence.
- You own the solar PV system, whether you paid upfront or are financing. Leased systems are not eligible.
- Your solar system must be brand new or have been used for the first time. You only get to claim this credit once for your solar PV equipment’s “original installation.”
If you’re unsure if you’re eligible or you have installed and turned on your solar PV system for the first time this year, congratulations are in order. And if you want to make the most of your 2021 tax return, we hope this mini-guide has helped you better understand the federal solar tax credit and your options.
Remember that the friendly and experienced team at Maggi Tax is always available to help you fill out all the proper paperwork to get the most back for your solar investment on your taxes! So, give us a call today!
