At Solar Panels Express, we know there has never been a better time to use solar energy than now. The ICT extension has allowed homeowners to get solar energy by dropping the cost of solar and home batteries.
The Investment Tax Credit was originally published in 2005 by the Energy Policy Act and set to expire at the end of 2007. Thanks to its popularity and success it was extended to expire multiple times. The most recent was December 2020 but was still extended for two years until 2023.
You not only get the advantage of the 26% offer when you install solar but also save a lot of money on energy bills.
How does the solar tax credit work?
ICT makes it straight forward. As long as you own a solar energy system, you are eligible for the solar investment tax credit. This is for you even if you don’t have enough tax liability to claim the credit in one year. It is possible to roll over the remaining credits into the coming years as long as the tax credit is in effect.
Most homeowners do not understand that if they sign a PPA or a lease with a solar installer, you don’t own the solar system. If you don’t own it, then you can’t receive the tax credit.
How do you claim your investment tax credit?
You get to claim your investment tax credit for solar energy when you file your yearly federal tax returns. Let your accountant know that you have gone solar in the past year if they file your taxes. If you do it on your own, use a step by step guide that the Energy Sage offers to help you claim your solar ITC.
Remember, nothing is claimed without the proper papers. Keep all your receipts ready from the start of the solar installation project. The more you spend on your solar project, the larger the credit. Be sure to keep track of all your spending without misplacing any receipts.
Here is a list of expenses that you are allowed to claim
- Freight shipping costs
- Solar equipment
- Solar consulting fees
- Electrician fees
- Solar consulting fees
- Engineer fees
- Tools for use during the project – rented or bought
- Equipment bought or hired
- Permitting fees
- Bolts, nails, wiring, screw, etc.
- Permitting service costs
You can install the solar panels yourself or hire an expert. Please note you will not claim your own labor charges, but you can claim the expert’s fee.
How can you be eligible to receive the full 26% tax credit?
To be eligible for the full 26% ITC, you need to have installed home batteries or begin the construction of your solar system by the end of 2022.
For those who have already had solar installed and collected their tax credit, you may be eligible for another one if you add home batteries to your existing solar system.
To collect any tax credit from the ITC, you must have paid your income tax in full. The ITC is an income tax refund plan. In 2023 the tax credit will be reduced to 22% and phase out completely in 2024. Make use of this grace period available.