With environmental concerns and energy costs both on the rise, renewable energy solutions are growing more and more attractive to home and business owners every year. In an effort to assist in this move to more sustainable practices, the federal government established a solar tax credit to help defray the costs of the project.
Some of the expenses you are allowed to claim as part of the cost of the project include:
Put simply, as a reward for investing in solar energy, you can claim credit for the following year’s federal tax return. For systems placed in service in 2020, you can claim 26% of the total cost of the project. This means that if, for example, you spent $10,000 on your new system, your taxes for the following year would be reduced by $2,600. These tax credits are a one-to-one reduction of your income tax: a one-dollar credit means one less dollar you owe on your taxes.
After a series of extensions of the Energy Policy Act of 2005, Congress passed a spending bill in late 2015 that makes these credits available in some form through 2021.
The deadlines are currently as follows:
For the most part, the tax credits available to residential and commercial property owners are very similar. The phase-out is largely the same for both, until 2022 when residential solar customers will no longer be able to claim tax credits and commercial customers will be down to 10%. Probably the most significant difference is the Safe Harbor clause present in the Business Energy Investment Tax Credit, or ITC, which allows businesses who pay for at least 5% of the total contract price to claim the full tax credit benefit, of the year they paid the 5%, for up to 48 months later. Work on the project must have started in that year and there must be "continuous effort to advance towards completion of the energy property”. This leaves some area for interpretation as the permitting process can take time as well as procurement of materials.
Whether you are looking into solar energy for your home or your commercial property, the time to act is now! Call Alternative Energy Southeast, Inc. today at (770) 691-0966 to find out if you could qualify for tax credits on your new solar energy system.
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