One of the motivations and investments of solar panel installation are tax incentives which are available with LA Solar Group. For example, there is a solar investment tax credit (ITC), also referred to as federal tax credit (FTC).
What you should first know about the solar ITC is:
- The ITC applies to both residential and business solar systems.
- The credit is applied to taxes owed in the amount of 26% (in the year 2020) of the solar installation’s net cost.
- Installation costs include the system, labor, fees, batteries, taxes, and certain remediation costs to install the system (e.g., main electrical panel upgrade, roof repairs, or cool roof installation).
- Any incentives (utility, state, or other) need to be deducted to arrive at the net cost.
- There is 26% credit for systems on which construction began before the end of 2020; 22% in 2021; 10% in 2022. In and after 2023, the residential credit is eliminated and becomes 10% for commercial use.
- ITC is a credit and not a deduction. Therefore, it is worth dollar for dollar.
- The credit is not considered income, so you do not owe tax on it.
- You need to owe at least the same amount of tax to take advantage of ITC. You can carry it over to subsequent years.
- If you are the primary owner for multiple homes, then credit needs to be pro-rated for each home and based on the amount of time you live in each home.
- There is no limit to the credit.
To be considered for the solar panel tax program, you are required to be the owner of the solar system. Leasing the system or purchasing it through PPA (power purchase agreement) means you will not be able to get the tax incentives.
The solar system must be installed with the existing solar panels and meet all the requirements needed to be eligible for the solar panel tax credit. You can sometimes face difficulties as the grid can also charge the solar battery system.
Going solar is always cost-effective, especially in 2020. The solar panel tax credit in 2020 will be approximately 5% less.
The information above is general guidance and not tax advice.
For this reason, please consult a tax professional about how the ITC might apply to your specific situation.