With electricity costs steadily rising and the environment under constant threat, homeowners are slowly transitioning to solar energy. The Resi Solar Investment Tax Credit has also played a major role in this as it offers incentives to people who install a solar power system in their homes. Through this credit, you can get back a portion of the costs incurred in installing the system. Learn in detail how much you can save with the Resi Solar Investment tax credit.
Understanding The Resi Solar Investment Tax Credit
The need to go green is important. However, encouraging people to give up their old habits is not easy. So, the US government introduced the Residential Solar Investment Tax Credit. This means if you install a solar power system in your home, you are eligible for a tax credit on the costs incurred. The Inflation Reduction Act that former US President Joe Biden passed has extended this incentive up to the year 2034.
This continues to encourage homeowners to adopt solar power. A percentage of the costs incurred can be claimed as tax credit, which reduces the total amount of tax you have to pay the government.
The best thing about the Resi Solar Tax Credit is that it is flexible and can be carried forward. Hence, if your tax liability is not very high, the remaining credits roll over to the next financial year. However, being non-refundable, you cannot expect any refunds but can get your tax amount reduced.
Costs Covered Under the Resi Solar Investment Tax Credit
The Resi Solar Investment tax credit can be availed on the installation of a solar power system in your house. However, not all costs are eligible for a claim. The ones that qualify are:
- Equipment generating electricity or heat
- Equipment that stores solar power
- Installation and labor charges
Additionally, properties that qualify for this tax credit include:
- House
- Condominiums
- Cooperative Apartment
- Mobile Home
- House Boat
- Manufactured Home that meets the Federal Manufactured Home Construction and Safety Standards
Note that you cannot claim the tax credit for a property that has been rented out. However, if you live in the property for part of the year and give it on rent when you are away, you can claim the credit.
Know What Qualifies You for Resi Solar Tax Credit
The Resi Solar Investment Tax credit can be a great opportunity for homeowners to convert their residences into green homes. Here are the criteria you should meet to qualify for this:
- The solar equipment should have been installed between January 1, 2017, and December 31, 2034.
- It should be installed in a residence located in the USA.
- The equipment is brand new and owned by the homeowner.
Amount You Save with The Resi Solar Investment Tax Credit
Installing solar power equipment in your home is a favor to the environment. In return, the US government shows its appreciation in a novel way by helping you reduce your tax liability. So, if you are all set to claim the Resi Solar tax credit, know how much you can save on taxes:
- 30% of costs for equipment installed between 2017 to 2019
- 26% of costs for equipment installed in 2020 and 2021
- 30% of costs for equipment installed between tax years 2022 to 2032
- 26% of costs for equipment installed in 2033
- 22% of costs for equipment installed in 2034
As of now, the plan is in place for 2034.
Summing Up
The Resi Solar investment tax credit is a great option to save on taxes if you are thinking of installing a solar power system in your house. The idea is to incentivize the gesture and reduce the taxes, thereby encouraging more people to adopt the sustainable option. With this, you not only save money by paying less tax but also help ensure a better world for the coming generations.
