Solar Energy & Tax Credits: What Can They Do For You?

Installing solar panels on your home is not only good for the environment, but it can also save you money in the long run. In addition to reducing your monthly electricity bills, you may also be eligible for federal and state tax credits for residential solar systems. In this article, we will explore the federal income tax credit for residential solar systems as well as a few examples of state tax credits.

Federal Income Tax Credit for Residential Solar Systems

The federal income tax credit for residential solar systems is also known as the Solar Investment Tax Credit (ITC). This tax credit allows homeowners to claim a credit on their federal income tax equal to 26% of the cost of their solar panel system. This credit applies to both residential and commercial solar systems and is available to homeowners who purchase their solar panels outright or through a solar lease or power purchase agreement (PPA).

To be eligible for the ITC, the solar panels must be installed on a home that you own and use as your primary residence. The solar panels must also meet certain performance and safety standards set by the National Renewable Energy Laboratory (NREL).

The ITC is a credit, not a deduction, which means that it reduces the amount of tax you owe dollar-for-dollar. If you do not owe any taxes in the year that you install your solar panel system, you can carry the credit over to future tax years until it is used up.

State Tax Credits for Residential Solar Systems

In addition to the federal income tax credit for residential solar systems, many states offer their own tax credits to homeowners who install solar panels. Here are a few examples:

1. California

California offers a state tax credit of up to $2,000 for homeowners who install solar panels on their homes. To be eligible, the solar panels must be installed on a home that you own and use as your primary residence. The credit is calculated as a percentage of the cost of the solar panel system and is based on your income.

2. South Carolina

South Carolina offers a state tax credit of up to 25% of the cost of a solar panel system, up to a maximum credit of $3,500 for homeowners who install solar panels on their primary residence. To be eligible, the solar panels must meet certain performance and safety standards, and the homeowner must own the solar panel system (i.e., not leased or through a PPA). The credit can be used to offset state income taxes owed, and any unused portion of the credit can be carried forward for up to 10 years.

3. Massachusetts

Massachusetts offers a state tax credit of up to $1,000 for homeowners who install solar panels on their primary residence. The credit is available to homeowners who purchase their solar panels outright or through a solar lease or PPA.

Conclusion

Installing solar panels on your home can be a great way to save money and reduce your carbon footprint. In addition to reducing your monthly electricity bills, you may also be eligible for federal and state tax credits for residential solar systems. If you are considering installing solar panels on your home, be sure to explore all of the tax credits and incentives that may be available to you.

To find out more information or get a free, no-obligation residential energy savings analysis, fill out the form below or give us a call! We can help you determine the best solar solution for your home and provide you with detailed information about available incentives and financing options!