Is 2021 the year you plan to make some energy-efficient changes to your home? The IRS offers tax credits, to place solar electricity or make solar heat improvements for your home. The IRS Website explains the exact breakdown of these tax credits for solar energy improvements.
Why Solar
As described on EnergySage, solar energy is great for our environment and provides more jobs for the US economy. It is however a more expensive energy system to install, in most cases. Because of this, the government is willing to offer tax incentives to help grow the industry. Financial savings, as outlined on this same website, can come in the form of investment or state tax credits, cash rebates, solar renewable energy certificates, or performance-based incentives. The availability of incentives does vary from state to state. The solar tax credit is not offered for solar improvements made to rental properties unless you reside in the rental yourself for a portion of the year. In this case, your credit is reduced to the percentage of time you live in the rental property during the tax year.
Federal Tax Credits
Federal tax credits will reduce the amount that you owe on your taxes by the credit amount. It does not result in a refund if you owe nothing (or owe less than the credit amount) on your taxes. Generally, the excess credit amount can be saved and carried over to the following tax year. An IRS Form 5695 will help you calculate your credit amount before entering it on your 1040. If you have any questions or concerns regarding the tax credits for solar improvement, we encourage you to reach out to us here.