Solar IncentivesDepending on your state, available incentives can cover a significant portion of the cost of going solar. Learn More
Federal Solar Tax Credits
The federal government also offers an incentive for residential solar, in the form of a tax credit. For systems installed in 2022, the credit is 26% of the cost of the system. It declines to 22% for systems installed in 2023.
A Tax Credit is Not a Tax Deduction
A tax credit is a direct reduction in the amount of tax you owe. If you have a $10,000 credit you would pay $10,000 less in taxes than you would otherwise owe. Many taxpayers are more familiar with tax deductions, which reduce the amount of income that is taxed. A tax credit is much more valuable.
Claiming the Solar Tax Credit
Unlike state-level incentives, which we usually can (and do) apply for on your behalf, you must claim the federal incentives on your own tax return.
There is one additional form involved: Form 5695: Residential Energy Credits. On line 1 of this form you enter the cost of your solar system. In our example, this is $20,000. The video here shows how to fill this out. After filling out the rest of form 5695, you take the result to Schedule 3, line 5 of Form 1040.
Residential Solar Tax Credits and Estimated Taxes
If you are required to file quarterly estimated taxes, you can take advantage of the federal incentives almost immediately after installing your system. (If you are required to file estimated taxes, you already know who you are. If you don’t know what estimated taxes are, you can skip this section.) Estimated taxes are based on the amount of tax liability you expect to have for a given year. Let’s assume our taxpayer above is required to make estimated tax payments. Since our taxpayer would expect to owe $5,200 less in taxes than she otherwise would because of the tax credits, she could reduce her estimated payments by $1,300 each quarter.
The Inevitable Disclaimer
You had to know this was coming, right? Certasun is not your tax preparer, accountant, or lawyer. We are not giving you individualized tax advice. You should consult your own advisors about your particular situation.
Let Us Tell You More
Certasun would be more than happy to explain more about both the available state incentives and federal tax credit. Sign up for a completely free, no-obligation consultation. We will provide a quote for a system for your particular home, calculate the value of the incentives, and clearly explain your financing options. Fill out the form below or call us at (312) 638-0800!