You might be wondering, “What are the benefits to owning a solar system?” One of the main perks is the federal solar tax credit. This incentive is designed to encourage solar development and helps the average homeowner save money and become more energy dependent along the way. And the best news? The 30% federal solar tax credit has been extended 10 more years to 2032!
The Extended Solar Tax Credit
But what does it mean? According to Consumer Reports, “If you install solar energy equipment in your residence any time this year through the end of 2032, you are entitled to a nonrefundable credit off your federal income taxes, equal to 30 percent of eligible expenses.” This 30% tax break extends to ANY amount you may spend on solar, whether you spend $20,000 or even over $100,000. For example, with a $20,000 system, you can claim 30% of that cost, or $6,000 dollars!
What if I Already Have a Solar System?
If you purchased a solar system from Jan. 1, 2022, forward, you are eligible to claim the full 30% federal solar tax credit.
Who is Eligible to Claim the Tax Credit?
To claim the tax credit, you must:
- Be a homeowner
- Own the solar system (i.e., purchased it with cash or financing)
- Have solar PV installed on your home or secondary residence
- Be connected to the electric grid
Having each of these requirements checked off allows you to claim the full 30% tax credit and get the most out of your solar system.
How Long Will the Extended Tax Credit Last?
The 30% tax credit is set to last until Dec. 31, 2032, and any system purchased Jan 1, 2022, and after is eligible to retroactively claim this credit. The credit would fall to 26% in 2033 and then 22% in 2034. The new law signed by the Biden administration supersedes a previous law that was set to expire in 2024. This is great news for those who have purchased solar in 2022 and beyond.
The good news is you can use the tax credit for up to 5 years If in any given year you do not have a sufficient tax liability to use all it.
How Will the Tax Credit Save Me Money?
The federal solar tax credit allows you to not only subtract 30% of your total system cost, but you will save too, in lower electric bills. However, how much you will save depends on several factors including how much electricity your household uses, the size of your solar system, the shading on your roof, and your local electricity rates. By contacting Michigan Solar and Roofing, we can help you determine all these factors to find a solar system that works best for your needs.
There is no better time than now to go solar! Technology is at its peak with new advances in renewable energy like the state-of-the-art solar shingle as well as battery systems and increased technology in traditional solar systems. The future is upon us!
As with any financial incentive, it is always best to consult with a certified CPA or tax professional regarding how it will affect your tax situation. You may also check out the U.S. Department of Energy’s website on this topic or the IRS frequently asked questions page on energy incentives for more information.