Renewable energy incentives come and go . And the solar federal tax credit is no different. Like all programs that are designed to boost green energy adoption, this highly successful incentive will one day expire.
However, for the time being, it remains one of the most stable and lucrative of all available incentives.
But what is the solar federal tax credit, and how does it work?
What Is the Solar Federal Tax Credit?
This incentive is a personal tax credit that allows solar photovoltaic (PV) customers to apply 30% of the total installation cost to their annual tax bill.
This credit is different from a standard deduction. With a deduction, you “deduct” the installation cost from your annual income, thus, reducing your taxable liability. But with a tax credit . you use this 30% to pay off your taxes. It’s like a gift card from the federal government.
For example, if you spend $10,000 on a new PV installation, you receive a $3,000 credit that you can use to pay off any IRS taxes for that year. If you owe Uncle Sam $15,000, you only have to send in $12,000 – the tax credit takes care of the rest.
When you combine this incentive with other solar programs, it's possible to dramatically reduce the upfront cost of your installation by as much as 50% – sometimes more. The federal tax credit also helps to shorten the payback period of your solar PV investment.
What Are the Requirements for the Solar Tax Credit?
Qualifying for the federal tax credit is relatively easy:
- Eligible renewable energy projects include photovoltaic panels, wind energy, fuel cells, solar water heating, and
geothermal heat pumps.
- With regards to solar PV projects, the installation must be performed by a licensed and certified contractor.
- The installation must go up on your primary or secondary residence (rental properties don't qualify).
- There used to be an upper limit on how much "credit" you could claim. Thankfully, this restriction has been removed.
And lastly, your installation must go online on or before December 31, 2016. Whether or not the program will be around after that is anyone's guess. But remember that incentives typically expire for a reason. Governments launch incentives in order to boost early adoption. And since 2006, the solar tax credit has helped grow the number of new installations by 1600% (a compound annual growth rate of 76%).
In other words, it has already been highly successful, helping to push down installation costs and boost adoption all over the country (including in San Diego). Given the popularity of solar energy, there may not be a need for federal tax credits by the time 2017 rolls along.
How to Apply for the Solar Federal Tax Credit
Applying for the program is easy. You can click here to get started.
But if you don't want to get bogged down in the paperwork and legalese, you can always have us apply for the program 100% on your behalf. This complimentary service comes standard with all Sunline Energy installations.
To learn more about the federal tax credit (or to have us apply for this incentive on your behalf), contact us today for a free consultation .
Just click here to get started.