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How The Federal Solar Tax Credit Works

Jessica PirroJuly 1, 20192900

Solar energy tax benefits have been around since 2005 when the solar investment tax benefit was created. Which was during a time when the cost of solar panels was very expensive. This solar energy tax benefit was designed to provide 30% of the cost of the solar panel installation (which is up to $2,000 for solar power residential systems) back as a credit on the homeowner's taxes the year after the solar panel installation. The design of this solar energy tax benefit was a success.

In 2008, at the height of the financial crisis, this form of solar energy tax benefits was reformed and the $2,000 limit on a solar power residential systems was dropped. After this reform, the number of solar panel installations increased numerously around the country and since then the amount of solar power residential systems that are installed is still climbing. This solar energy tax benefit reform is one of the reasons the solar panels has grown more than 8600% since 2006.

The Solar Panels Tax Credit Will Only Save You Money If You Qualify

The solar energy tax benefits are a great incentive for one to reduce to cost of solar panels, but the solar panels tax credit is not one of the solar incentives that are for everyone. This solar energy tax benefit is for homeowners who are looking to install a solar power residential system that has a solid income, but not an income that is bringing in too much revenue. In the United States, a typical family of four brings in around $90,000 per year and they can expect that they will owe enough taxes to claim the average solar tax credit.

The people who earn less than that are the ones who are able to benefit from this solar incentive. If they have taxes taken out of their paycheck and get a small refund each year, they should be able to expect the solar energy tax benefits to get a bigger refund. Depending on their income, the refund could be substantially larger.

The catch to this solar incentive is that it is not “fully refundable” which means that if you can’t get the money back you wouldn’t have otherwise paid in. However, even if you aren’t able to take the full credit in after the first of your solar panel installation, you can still use this solar incentive to reduce your tax liability until the entire thing is used.

How a Solar Panel Installation Will Get You More Back in Your Tax Credit in 2019

In order to get the precise amount that you will be saving on the cost of solar panels by using solar incentives in the form of the investment tax credit, you will need to know the exact price of the solar power residential systems. But for demonstration save we will male a small chart based on the average cost of solar panels and then show the amount that will be saved based on the solar energy tax benefit. Then you will be able to see the amount you lose if you wait a year to do a solar panel installation and your solar incentives will lose 4% of that tax credit.

Year

% Saving On the ITC

2019

30%

2020

26%

2021

22%

2022

(Commercial Only) 10%

These are again just averages, and there will be more variables that will determine the cost of solar panels. In order to find out the exact amount you will be saving on solar panels using this solar incentive you will need to know; the system size in kilowatts, the cost of solar panel after the rebates (the tax credit will be 30% of this), and how much of the tax credit you will be able to claim after the first year of the solar panel installation.

The Average Cost of Solar Panels 

The average cost of solar panels was determined by a few different sources. These sources all helped determine the average cost of solar panels in all 50 states. The average amount of solar panels that are needed for solar power residential systems in all 50 states as well, is based on electricity usage data that was gathered from the U.S. Energy Information Administration. It was determined that on average, in the U.S., the needed solar power residential systems size is 8-kW and before solar incentives cost of solar panels and solar power residential systems is $26,000.

The Average Solar Tax Credit And How Much Waiting Will Cost You

At $26,000 for solar panel installation, the average solar tax credit at the full 30% is $7,800. But if you wait a whole year to get a solar panel installation, the tax credit will be 26%, or $6,760. This means that the average cost of waiting until 2020 to get a solar panel installation is going to be over $1,000.

The Right Time To Go Solar Is Today

The right time to get a solar panel installation is today. You can make sure that you maximize the solar energy tax benefits as well as the other solar incentives that come with switching to solar. If you want a more accurate cost of solar panels you can go to hahasmart and use the price checker to find out how much it would cost for your solar panel installation.

Solar system price checker

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