Federal Investment Tax Credit for Solar and Batteries
… and new battery installations!
Last week I (Intern Liz) went over Net Energy Metering. If you haven’t read that, here’s the link.
Article layout: what my understanding was, what I researched, then what I learned.
- The current tax credit is 26% for if you install solar panels and batteries.
- This means that when you get solar, you will get 26% off of your purchase.
- So, instead of getting charged 26% in taxes, you gain that 26% back. Which, if I am correct on this, is a crazy amount of money!
- For example, if you put 20,000$ into solar, you’ll receive 5,200$! So you basically only pay 14,800$.
*Note this was my understanding before research, and I was wrong in some aspects. Below is the correct information on it.
I got my information from 5 different articles and 3 videos to make sure I got a good grasp on the topic. The federal tax credit is also known at ITC.
- Here’s what a tax credit is; it’s a dollar amount that decreases the income taxes you owe during tax season.
- For the solar tax credit, it is claimed on federal taxes and there is no maximum limit. If your tax credit exceeds the amount you owe, it will carry over to the next tax year.
- This solar tax credit rolls over to the next year if the complete amount is not used
- You will need to fill out the IRS form 5695 for it.
- In 2019, it was a 30% tax credit, in 2020 it went down to 26%, and in 2022 it will only be 22%.
- In 2024 it will expire unless congress renews it.
- This tax credit is on a federal level, not just a state level.
- You have to own the system to qualify, so you do not get the tax credit for a lease but the leasing company does.
- Everything you got charged for (labor, the panels, batteries, etc) count towards the tax credit.
- Batteries that are installed as a separate or future install as the solar also receive the tax credit as long as the battery is charged by the solar.
- If you already got a rebate from a utility company, they just subtract it out of the total cost. But, if your rebate was from the government, it is not subtracted out.
*One great thing to note: Since you are not having to pay X amount of taxes because of the tax rebate, you get that much more back in your returns!
What I Learned
I had a lot to learn to better my understanding of the solar and battery Investment Tax Credit (ITC), which is partly why SEG is assigning me to write these journal posts. Not only to learn the basics of solar but also re-teach the reader!
- Now I know what the word tax credit means, which plays a big role in understanding the ITC aka solar tax credit.
- My new understanding is that you will get off X amount of federal taxes you owe, based off of the total amount you pay for getting a solar system installed.
- I also learned that the tax credit is decreasing every year!
- That’s so sad, I want to see solar to be encouraged and losing these benefits lowers the incentive for people to go solar.
This also shows me that it is a pretty urgent matter to jump on and go solar. Now’s the time! I wish I was a homeowner already so I could reap these benefits, but hopefully they’ll have new and improved technology or continued benefits when I eventually do own a home!
I also hope that you guys got to learn something new from this journal. I will be putting out a few more journals in this little series to learn more on my end, and spread that information!
Check back in next week to see that topic! Thanks for reading!