Death and taxes are two certainties in life. Yet high taxes are not so certain.
The average middle-income American family paid $15,748 in taxes in 2018. You can trim this number down if you qualify for the solar panel federal tax credit.
What is the federal tax credit for solar panels in 2021? When is the solar panel federal tax credit expiration date? How can you qualify for the tax credit?
Answer these questions and you can save your money while helping save the planet. Here is your quick guide.
The Terms of the Solar Panel Federal Tax Credit
A tax credit is a dollar-for-dollar discount on your taxes. If you receive a tax credit for $1,000, you pay $1,000 less to the government.
The federal solar tax credit affects solar panel purchases and production in the United States. If you buy a solar panel for your house and use the electricity from it, you can qualify. You must own the system and it must be entirely new.
You can claim 26% of the installation cost as a tax credit if you install your system before 2023. Once the new year begins, you can claim only 22% of the installation cost. The federal tax credit expires in 2024 unless Congress renews it.
There is no ceiling on how much money you can claim. You may be able to claim thousands of dollars if you buy a big enough system. Expenses for labor costs and energy storage devices as well as sales taxes count toward the tax credit.
There is no disadvantage to claiming the tax credit. It can help you reach a return on your investment faster.
How to Claim the Credit
You should build a solar panel system as soon as possible. Yet you do have until the end of the year.
Spend some time considering what panels you want. You should look at different solar installers in your area and compare their packages to each other. Once you find a company you like, you should schedule an installation.
Keep all documents related to the installation, including receipts and bank transactions. You may need to provide proof of how much you paid.
Complete your tax documents with the help of a financial advisor. Inform them about your installation and look at any state tax credits you can claim.
Track how much money you make from your solar panels. You may receive credits from your utility company for selling electricity to the grid. This money may affect your taxable income.
The Essentials of the Federal Tax Credit
The solar panel federal tax credit is a great opportunity. You can claim 26% of the cost of a residential solar panel system as a dollar-for-dollar tax credit. This can translate into thousands of dollars in savings.
Yet you must install your panels before the end of this year. If you wait until 2023, you can claim 22% of the cost.
Look at your different options for installation companies. Find one that offers the services you need and then schedule an installation.
Find other ways to reduce your taxes. Read more guides to tax credits by following our coverage.
