Installing a solar energy system can be intimidating, especially if you're on a tight budget. Solar panels retail at around $15,000 to 20,000 on average, therefore installing one in your business or home is a considerable investment. However, in the long run, residential solar energy systems can help you save a substantial sum of money.
There are also many tax credits and rebates available to motivate homeowners to start using renewable energy from solar panels. There are state, federal, and local benefits that you could be eligible for when you put in place an eligible system.
At Solar Panel Installation Solutions, we can not only assist you in deciding which kind of solar panels along with other system components to purchase, and then handle the setup procedures on your behalf, but we also make sure that you will take full advantage of all accessible incentive schemes and rebates, including the Federal Solar Energy investment tax credit.
We will go over the specifics of how investment tax credit functions and provide you with an estimate of how much money you'll save. We can provide you with that information both before as well as after you choose and install the solar products, making financial management and long-term planning easier. Contact us today to set up a free and no-obligation consultation with our experts. We serve homeowners and businesses in Fresno, CA.
What is the Federal Investment Tax Credit?
Since the passage of the Federal Investment Tax Credit (ITC) in 2005, both homeowners and businesses have received federal incentives needed for making the setting up of new solar panels, associated tools, and other sustainable energy technologies far cheaper. The basic principle of the Investment Tax Credit is that you can receive a federal tax credit equal to 30% of the entire expenses of buying and installation of solar power systems on your premises.
The ITC was introduced in 2005 by the Energy Policy Act and was expected to become invalid by the end of 2007. Because of the ITC's wide acceptance and efficacy in assisting the United States' shift to a sustainable energy economic system, Congress has repeatedly stretched its expiry dates, the latest being in 2020 to prolong the ITC at a rate of 26% for two more years. The solar investment tax credit is now accessible to homeowners until the end of 2022 in another form. The details are as follows:
- From 2016 to 2019, the investment tax credit continues at 30% of the system's cost
- From 2020 to 2022, proprietors of new commercial and residential solar systems can claim 26% of the system's cost from their taxes
- Proprietors of new commercial and residential solar power systems will be eligible to claim 22% of the system's cost from their taxes in 2023
- Proprietors of new industrial solar power systems will be eligible to claim 10% of the system's cost from their taxes starting in 2024. Domestic solar power systems will not be eligible for a federal tax credit
Previously, owners of recently installed solar power systems would have to wait until the system was "fully functional" before receiving the ITC benefits, but now you can collect it as long as your system is put in place or constructed.
How Does the Federal ITC Program Work?
The solar investment tax credit is available provided you are the owner of the solar energy system. Even though you may not have sufficient tax liabilities to receive the whole credit within one year, you could "carry forward" the benefits into subsequent years as far as the claim is available. You cannot receive the tax credits when you sign the contract or a power purchase agreement (PPA) with a solar contractor because you aren't the proprietor of the solar system. Finally, it's worth noting that the investment tax credit scheme has no income limits, therefore taxpayers from all income levels could be qualified.
Current Solar Tax Credit Eligibility
When you aren't certain if the investment tax credit applies to you, your business, or your property, take into account the following criteria:
- The solar photovoltaic (PV) unit was put in place between the 1st of January 2006 and the 31st of December 2023
- The solar system was on your secondary or primary property inside the United States
- The power generated by an off-site solar plant is credited against and doesn't surpass your property's electricity use. A taxpayer can claim a clause 25D tax credit for acquiring a piece of a local solar installation, as allowed by the IRS
- You are the owner of the solar system, which means you paid cash for it or borrowed money to pay for it. You never signed a PPA or a lease
- The Solar Power system has just been installed or is currently being utilized for the first time. The credit will only be collected for the initial setup of the solar system. For example, you will not be qualified for the benefit if you purchased a home that already had a solar system set up
Calculating the ITC Tax Credit
There are a few things you should know about calculating your ITC credit when filing federal tax returns. Homeowners and business owners have varied experiences. People who set up solar panels within their properties must deduct state incentives as well as local energy rebates to reach their "net" setup costs, which will then be multiplied by 30 percent. In commercial establishments, it is determined by their "gross" installation expenses. As a result, businesses do not need to deduct any incentives or rebates savings before they multiply by 30%.
This offers businesses a larger tax credit, which could appear unreasonable at first. There is, however, reasoning behind this. This is because the incentives and rebates are recognized as "income earned" and hence taxes for businesses, but are treated as "discounts" and therefore not taxes for homeowners.
As a result, while businesses benefit from a larger ITC, they pay more in taxes for solar system installations before receiving the ITC. The situation is reversed for homeowners, but it works the same for both scenarios.
Benefits of The Federal ITC Program
The federal Investment Tax Credit, noted above, is the single most significant financial cost savings program for homeowners and businesses who opt to "switch to solar." Regardless of whether you use cash to purchase a new solar panel or finance it with a reverse mortgage or even a standard mortgage, the investment tax credit should save you 30 percent on the cost of installation. Even though you are not eligible for the ITC since you are on a power purchase agreement or leasing the solar system, you'll almost certainly benefit from the 30 percent cost savings.
As a result, ITC might benefit you directly or indirectly. Furthermore, since a recent California law mandates that many new constructions in the state include solar panels that have been set up on the property or the building, the ITC tax credit becomes even more important for California residents - particularly when they plan on buying a brand new house or commercial buildings in the foreseeable future.
Because of the investment tax credit, there has been quite a significant increase in rooftop as well as other photovoltaic panel installations across California and the United States as a whole. The program's extensions have stretched the spike, and it appears that it will continue at least till the end of this year (2022).
For instance, following the recent 2015 extension, solar market jobs increased by 25%, with similar growth in the number of panel installations. This pattern is likely to persist for another five to 10 years, if not longer. Now is an excellent opportunity to put up your solar system! And you would not want to skip out on the rewards by waiting until the ITC benefits are reduced and ultimately (perhaps) terminated over the following several years.
However, considering how much the investment tax credit bill and its expansions have enabled alternative sources to take root in the United States, causing other energy sources to be utilized much less than they might otherwise be. The industry, homeowners, business owners, as well as the environment, all benefit.
Counting the Costs of Solar Energy
In one aspect, solar energy has always been free; there are also no taxes imposed on sunshine, as well as no effort is needed to make sure the sun is always shining. It's a never-ending, renewable energy resource that will last as far as there's life since we can't exist without it. However, capturing the energy from the sun efficiently and successfully requires effort and money. Many solar systems cost between $15,000 and $20,000, including equipment and installation costs. However, depending on the size and type of system you choose, that figure can be significantly lower or much higher.
Different solar panels as well as system equipment manufacturers and models have varying price tags, different degrees of efficacy when installed, and different uses in which they make more sense to use. We can provide you with multiple quotes for the design and installation of your solar panel system, depending on multiple options. We can outline the cost-benefit proportions of each option, and also how the design or positioning of your facility may influence these decisions.
We are equally quick to secure you every potential local and state rebate or incentive and to assist you in selling back solar energy to your electricity provider to save much more money. However, without a question, one way we can help you save money on your solar panel system is by assisting you in applying for the Federal Investment Tax Credit.
Your solar panel system will ultimately pay for itself and help you save money on your electricity bills. But keep in mind that the benefits of preventing environmental damage by utilizing renewable sources of energy are difficult to quantify.
How Solar Panel Installation Solutions Can Help You
We have extensive knowledge in all aspects of solar panels as well as solar system installation. Our team has many years of experience and is knowledgeable about every form of solar panels now available. Our services are performed to the utmost quality by our experienced team. We set up your system to produce optimal power and last a long time, following all manufacturer requirements, to protect your products' warranties.
We can also assist you in designing your solar system, selecting the ideal placement on your premises for it, successfully installing it, providing step by step instructions including how to best utilize and care for it, and assist you in becoming eligible for several incentive schemes, such as the ITC.
At Solar Panel Installation Solutions, we ensure to keep our prices low and our services accessible all year. We seek to increase energy sustainability and environmental friendliness in households, companies, and neighboring counties to ensure that we have a significant impact on decreasing our overall carbon footprint in our region. We can assist you in saving money whenever possible while you try to improve the energy efficiency of your home and property and lessen your reliance on fossil fuel-based forms of energy.
Find Solar Power Installation and Service Providers Near Me
Solar Panel Installation Solutions keeps up with all of the latest developments in the solar power industry. We are well conversed with how to help our clients choose the best quality products as well as how to set them up properly for maximum performance and long-term productivity.
We also recognize that solar power systems are not cheap to install but having them on your property will save you money over the long term. As a result, we are eager to show you how you can save money using the Federal Investment Tax Credit (ITC) for all your solar power system installations. We will also strive to help you maximize your savings with ITC, local and state rebates, and incentive programs. For a free consultation and more information about the federal solar investment tax credit, call us at 559-890-2205. We service Fresno, California.