TAX CREDITS BENEFITS

30% Federal Solar Tax Credit Extended Through 2032

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TAX CREDIT: HOW IT WORKS

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TAX CREDITS & INCENTIVES FOR HOME ENERGY STORAGE SYSTEMS

You may have heard that there are tax credits and financial incentives for installing renewable energy products like solar panels on your home. But how do you know what those incentives are? Which products qualify? 

Let’s break it down.

FEDERAL SOLAR TAX CREDITS

The federal government offers a federal income tax credit for a percentage of the cost of your solar photovoltaic (PV) system and battery backup, such as KOHLER Power Reserve. To qualify, the system must:

Located at your primary or secondary residence in the United States

  • Be owned, not leased, by you (monthly payments toward ownership qualify)

The credit can only be claimed on the original installation. That means that any additions to your solar array after the first year are not eligible for the tax credit. Energy storage systems without solar panels are also ineligible for the federal solar tax credit.

The tax credit ranges from 26% – 30%, depending on when your system was installed. This credit is a reduction on the amount of federal income tax you owe. For example, if you qualify for a credit of $3,000, the amount of taxes owed will be reduced by that amount. Here is a guide to understanding how much you could save:

  • Solar panels installed before December 31, 2019 qualify for a 30% tax credit
  • Solar panels installed between 2020-2021 qualify for a 26% tax credit
  • Solar panels installed between 2022-2032 qualify for a 30% tax credit

Note: Power Reserve is not eligible for a tax credit without an accompanying solar system.

STATE & LOCAL SOLAR TAX CREDITS

Some states, such as California and Hawaii, offer additional state tax credits or rebates on solar installations, but many states do not yet have credits or financial incentives in place. Some power companies offer rebates, so we always recommend checking with your electric company to see if rebates are available. Your authorized KOHLER Power Reserve dealer can also provide information on state or local incentives for going solar.

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Guide to the Federal Tax Credit for Solar Photovoltaics

How do I make sure I’m eligible to claim the Solar Tax Credit?

To qualify for the 30% Residential Clean Energy Credit, you’re solar system needs to be installed and deemed operation by a city inspector in any of the tax years 2022-2032. The 30% credit applies retroactively to systems installed in 2022 when the credit was still at 26%.

Even though physically installing a solar system usually does not take more than a single day, many homeowners do not realize that a solar project may take weeks to complete after contract signing. This is due to factors such as permitting, financing approval, utility approval, and so on.

While you don’t have to worry about the tax credit stepping down for another 10 years, there are plenty of reasons to install solar sooner rather than later. First, the sooner you install, the sooner you will see a return on investment. Second, net metering policies are subject to change over time, so it’s best lock net metering while its available.

How big of a difference is a 26% tax credit versus a 30% tax credit?

The Investment Tax Credit is applied to your solar array’s gross system cost, so the amount you receive is dependent on the amount of solar you’re purchasing. The bigger system, bigger credit.

Here’s a quick example of the difference in credits in 2021 (26% credit) and 2022-2032 (30% credit) for a $27,000 9 kW solar array.

Installed and claimed in 2022-2032 taxes at the full 30% level, your credit would be $8,100. Installed and claimed in 2021 taxes at the 26% level, your credit would be $7,020.

That’s a savings difference of $1,080 compared to the previous year.

While ~$1,000 may not seem like a huge difference to some, if you’re already decided to go solar and just waiting for the right moment, you should move forward this year to maximize your savings.

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How do I claim the tax credit?

To claim your project tax credit when filing taxes, complete IRS Form 5695 – Residential Energy Credits.

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Solar Investment Tax Credit: What Changed?

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How Does Solar Work?

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10921 Pellicano Dr El Paso, TX 79935

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