The cost of residential solar installation can be anywhere from $15,000 to 25,000 or even more. There are a number of variables that will determine your cost of installation, including the size of your home, power consumption level, and the amount of solar your area receives.
If you’re anything like most people in the United States, you either don’t have that kind of money at your disposal or if you do, installing solar isn’t a priority.
The good news?
There are solar tax credits you can take advantage of. These credits can substantially lower the cost of solar installation.
In this article, we’re diving into all you need to know about these tax credits.
The Federal Tax Credit for Solar Photovoltaics
Before we get into the meat of the federal solar tax credit, which is also known as the investment tax credit (ITC), let’s define what a tax credit is. A tax credit is the reduction of your income taxes. It’s a dollar-for-dollar match.
For example, if you have a $500 tax credit, the amount of money you would pay as income tax will also reduce by $500.
The ITC allows homeowners to claim a certain percentage of their cost of residential solar installation off their federal income taxes. From 2016 to 2019, homeowners who installed solar were able to claim 30 percent of the installation cost.
In 2020, the amount you can claim is 26 percent. This will fall to 22 percent in 2021. The incentive is bound to expire in 2022 unless Congress renews it.
So, if you’re a homeowner and you haven’t installed solar, time is fast running out for you to take advantage of the federal incentive. If you’re wondering whether the incentive is worth it, let’s crunch some numbers.
Let’s say a solar installation specialist has given you a $20,000 quote for solar installation.
Using the 2021 tax credit, you’ll be able to take off 22 percent. This comes to around $4,400, which means your total cost of installation will be $15,600. Isn’t that a substantial discount?
If you’re a business owner and want to use solar on your commercial property, you’ll enjoy the same incentive, but from 2022, the percentage will drop to 10 and stay there permanently.
State/Local Tax Credits & Installer Incentives
Besides the federal tax credit for solar, various state and local governments also have incentives that both home and business owners can take advantage of. These incentives vary from state to state, so you’ve to do some research and learn what your state of residence offers.
In Florida, for example, there are a number of programs that incentives residents to go solar. There’s the FL Net Metering, which allows you to sell excess energy your system produces. In Orlando, FL, there’s a specific incentive where the Orlando Utilities Commission pays you $0.05 for every kilowatt-hour that your system produces –inclusive of your own consumption.
Check out https://blueravensolar.com/florida/orlando/ for more information.
Most local installers also offer incentives, such as discounts on solar panels and installation services, as well as flexible financing terms.
Go Solar Affordably with Solar Tax Credits
At a time when most people who want to embrace solar can’t afford it, solar tax credits go along way. With this guide, you now understand how the federal tax credit for solar works. You can also find state and local incentives.
It’s time to go solar, and while at it, keep reading our blog for more lifestyle tips and hacks.