What is Solar Tax Credit?
There are many reasons why many people are going solar this year, solar tax credit being one of them. Congress recently extended it for another two years, making it an ideal time to go solar. This blog will go over what solar tax credit is and why you should consider going solar in 2021.
What is Solar Tax Credit?
Solar tax credit is a credit that can be claimed on federal income for a percentage of the costs of your solar system. Other types of renewable energy are also eligible for this credit, but in this case, we’re focusing on solar systems. For you to make use of the solar tax credit, the system must be installed and put in service during the tax year. For you to be eligible, you must meet the following criteria:
- Your solar system was installed within the tax years that offer solar tax credit
- Your solar system is located in your primary or secondary residence in the United States
- You own the solar system (either cash or through financing)
- The solar system is brand new or being used for the first time. The credits can only be acclaimed in the original installation of the equipment
Tax Credit Extended at 26% Until 2022
There is some good news for the people who are thinking of going solar soon. Although it seemed that the solar tax credit was going to be gone, the current federal solar credit guidelines were recently extended through 2022 when the president signed the Consolidated Appropriations Act in December of 2020. Under the new legislation, the residential solar tax credit would stay at 26% for 2021 and 2022, and then drop to 22% in 2023. This makes 2021 and 2022 one of the best years to go solar. This should be taken advantage of before 2023 since it will drop by 4% by then.
How Does Solar Credit Work?
As long as you own your solar energy system, you will be eligible for the solar investment tax credit. Even for people who don’t have enough tax liability to claim in one year, they can “rollover” the remaining credits into the future as long as it is in effect. Just note that if you sign a lease with the solar installer, you are not the owner of the system, so you would therefore not be able to receive the tax credit.
Why Go Solar?
Burning coal, natural gases, and oils for electricity and heat make up roughly 75% of U.S. greenhouse gas emissions. These pollutants significantly contribute to global warming and rising sea levels taking place on the Earth. Renewable alternatives such as solar power help reduce people’s carbon footprint, thus slowing down the effects of global warming. People are starting to take a stand against this issue by going solar. Apart from helping the environment, going solar saves you money on you gives you tax credit. This is a great deal for all homeowners in the U.S. Aside from reducing your carbon footprint, other benefits you get from solar energy includes:
- Eliminating your electric bill
- Getting a great return on investment
- Protecting yourself from rising energy costs
- Increasing your property’s value
- Boosting the U.S.’s energy independence
- Creating jobs and helping your local economy
2021 is a great year for people that are going solar since they can expect a decent return on their taxes. 26% tax credit is here to stay until 2022, with a drop of 4% in 2023. We hope this blog helped you understand what solar tax credit is and why you should consider going solar in 2021. For more information, give California Showcase Construction a call at (951) 682-0208 or fill out our contact form to schedule an appointment.
