If you are looking for a way to protect the planet, reduce your energy bills and save on taxes, then you might be thinking about solar energy. You have probably heard that there is a solar energy tax credit, also known as an Investment Tax Credit (or ITC) for solar panels. In order to make sure that you get the most out of the tax credit, there are several important points that you have to know.
1.The Deductions Available from the Solar Tax Credit
A solar tax credit was initially established back in 2005 under the Energy Policy Act. Originally, it was set to expire back in 2007. Because it was so popular, the tax credit has been extended. In order for homeowners and business owners to claim this deduction on their taxes, it has to be claimed during the year in which a system itself was constructed. From 2016 to 2019, the tax credit is 30 percent of the total cost of the system. In 2020, the tax credit for homeowners is going to drop to 26 percent, dropping to 22 percent in 2021. In 2022, there will no longer be a solar energy tax credit for homeowners. For business owners, the credit is going to stay at 10 percent in perpetuity.
2.How Does the Tax Credit Work?
Given that the residential tax credit is going to expire soon, it’s a good idea for homeowners to act quickly and take advantage of a tax credit now. Because it’s a tax credit, it works differently than a tax deduction.
With a tax deduction, the amount of the deduction is subtracted from someone’s gross taxable income. On the other hand, and tax credit is directly applied to the amount of money that someone owes in taxes. Therefore, a tax credit is far better when it comes to a tax shield. This is one of the reasons why the solar tax credit is so popular.
3.How Is the Solar Tax Credit Claimed?
This investment tax credit for solar energy is claimed on homeowners are business owners file their yearly federal tax return. Therefore, for those who use an accountant, it’s critical to let your accountant know so that this tax credit can be applied properly to your tax return. For those who file their own taxes, look up information on the solar tax credit on the IRS website. That way, you’ll claim the solar tax credit in the right spot on your tax return.
Invest in Solar Energy with Maui Solar Project Today
Given the weather in Hawaii, solar energy is incredibly popular on Maui. If you are looking to set up solar panels or solar energy system on Maui, then enlist the help of a solar company based on the island. At Maui Solar Project, we can help you get your solar energy system set up and running quickly. Contact us today!