When Does the Federal Tax Credit for Solar Energy End?
Yes, the whopping 30% Federal Tax Credit is going to expire.
Did you know that if you install a residential solar energy system in your home, you’re eligible for a whopping 30 percent tax credit? That’s on top of any other incentives offered by your state! But when does the federal tax credit end? How long will it be around? Here’s what you need to know:
Federal Tax Credit? What?
The Energy Policy Act of 2005 initially stated the federal tax credit for residential energy could be applied to solar electric and water heating systems. Then in 2008, the tax credit was extended to geothermal heat pumps. Afterwards, the credit was extended another eight years.
Now, the credit is due to end December 31, 2016. Taxpayers can claim a credit of 30 percent of systems owned and used by a residence, including the cost on the system, installation, and other labor. However, to take advantage, all solar systems must be in service by the 2016 expiration date to count. Other requirements apply depending on the type of solar energy system you install.
How Does the Credit Work?
Instead of a deduction from your taxable income, the credit is applied off your tax payment. Claim it for your primary residence, vacation home, or a new home under construction. The best part is that there is no limit to the dollar amount of the credit! All you have to do is file your tax return and figure out the credit on the form. You won’t get money from the IRS if the credit exceeds your taxes due, but it will roll over into the following tax year.
Note: if you own rental properties, you can’t claim the credit, unless you live in the house for part of the year (e.g. you rent your vacation home during the winter when you’re not there). If you’re not living there all the time, the credit is reduced somewhat — three months of living in that home means you can claim 25 percent of the credit.
How Has the Tax Credit Helped?
The Solar Investment Tax Credit (ITC) has helped homeowners and businesses alike invest in solar energy, driving up competition between manufacturers and installers, and in turn lowering the cost for everyone. It’s been so successful that according to the Solar Energy Industries Association, it helped annual solar installation grow by over 1,600 percent since it began. Yes, you read that right.
How Long Until the Credit Expires?
Unless the federal tax credit is extended further, you’ve got two years to get your solar system installed in your home. Given the way the credit has increased solar manufacturing and growth in solar energy overall, it seems like a great idea to keep the credit going. However, you never know. That’s why if you’ve been debating whether or not to install solar, it’s best to do your research now and act soon, just in case you can’t take advantage of the credit later. Between the federal tax credit and whatever rebates and credits are available in your state, you should be able to reduce the cost of installing solar panels significantly.
The bottom line: Don’t wait to go solar, click the button below to get a solar estimate today.
Image Credit: Tax Credit at Flickr under a Creative Commons license