For decades, many have regarded solar panels as the gold standard of green living. However, solar panels aren’t known for their affordability.
The 2010s saw tremendous improvements in solar panel efficiency and affordability. Despite these advances, though, the average solar panel price in the US remains $15,000-$25,000. So, how can you make these systems more affordable?
One way to afford solar panels is to claim the federal government’s solar tax credit. Since 2005, the federal government has offered a 26% tax credit for residential solar energy systems.
Claiming the federal tax credit for solar requires you to fill out a solar tax form. We’ll tell you everything you need to know about this credit and its tax form in the guide below!
The Federal Tax Credit for Solar Panels
First, let’s take a second to break down the federal solar tax credit. This credit began in 2005 with the Energy Policy Act.
You can claim this on your income taxes and reduce your tax liability. Since 2005, this tax credit has consisted of 26% of the cost of solar panel systems. This percentage will decrease in 2023 to 22%.
Remember, the goal of this credit is to make solar energy more affordable for the average homeowner. You can estimate how much your solar panels will save you in several ways. One method is to use a zero commitment savings report.
Your solar energy system must begin service during the current tax year to qualify for this tax season. Once you determine that you qualify, request the IRS Form 5695, also known as the solar tax form. You can request this document from the IRS website and review their instructions.
Filling Out the Solar Tax Form
Once you receive IRS Form 5695, it’s time to start filling it out. There are several things claimants must include on this form.
First, calculate the total cost of your solar power system. This cost determines how much of a tax credit you’ll receive. This information goes on line 1 of the document.
Next, add any additional energy-efficient improvements you’ve made to your home. You can include this information on likes 2-4. Add all of these additional costs to the number on line 1 and place the sum on line 5.
From there, calculate the tax credit value. Take the final figure of how much you’ve spent on energy efficiency and multiply it by .26 or 26%. Once you calculate this sum, place it on line 6.
The next step is to calculate your tax liability. Sufficient tax liability on your taxable income qualifies you to receive the full 26% credit in one year.
From there, calculate any carry-over credit. Once you’ve done so, you can enter your final credit on Form 1040. You can enter the final number on line 5 of Schedule 3.
Request Your IRS Form 5695 Today
Filing your solar tax form is an incredibly beneficial practice during tax season. So, if you’ve installed a solar panel system this tax year, take advantage of it! File your IRS Form 5695 today.
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