It’s been known that one the most significant policies toward renewable energy growth in the U.S. is the tax credit that’s awarded to those that go solar. Set to expire in 2019, the solar industry may have not had such a success if it the Investment Tax Credit (ITC) was never deployed. If you have purchased your solar system, the you’re automatically entitled to receive this federal tax credit which is why it’s important to file for the credit for the year that you’ve installed it. That means if you’ve installed your solar system last year, then you’ll be filing this year (2017) for your 2016 taxes. The credit is equal to 30% of your total cost toward alternative energy equipment installed on your primary or secondary residence/business. When filing, you will take that amount directly off any tax payment, rather as a deduction from taxable income. There’s also no limit to the amount of credit one can get.
The ITC is not a payment made to the tax payer in cash. As a credit, the amount you receive is determined by whether you owe taxes to the IRS or whether you’ll be receiving a refund from the IRS. For example, if you purchased your solar system for $10,000 then you ITC will be $3000 with your total net cost for going solar at $7000. If your tax filing resulted in $2000 owed, then 2/3rds of your credit will go toward what is owed and $1000 will be returned to you in a lump sum. If your tax filing resulted in a return, then you’ll receive the full $3000 ITC amount as a lump sum check.
HOW TO FILE FOR THE ITC
Filing the ITC is a simple process. We always recommend that you consult with your tax accountant/CPA to determine how you will qualify and receive the ITC. When filing, be sure to present the following to your tax professional:
SIGNED SOLAR AGREEMENT – The final contract you signed with us to go solar
NOTICE OF ACTIVATION – Once your system has been granted for operation, your system is ready to be turned active (PTO). Your utility company will send you an email that will notify that your system has been granted.
COMPLETED FORM 5695 – This is the “Residential Energy Credit” IRS form your tax professional can assist with.