Solar power certainly seems to be the way of the future, with the adoption of solar energy systems are increasing in popularity across the last decade. Solar power has many benefits to the environment but it also helps homeowners save money on their energy bills, pushing many to make the switch.
If you’re interested in installing a solar energy system at your home, you may be curious about how best to go about the process. How much do you have to invest in the initial installation?
The good news is that currently there are a number of federal solar tax credits that help keep the cost of installing solar down. You can take advantage of any potential tax credits when you submit your online tax return at the beginning of the year. So what are the 2021 tax credit opportunities and what do you need to know about them? Read on, and we’ll walk you through the basics.
Current Solar Tax Incentives
Before leaving office at the end of his term, President Donald Trump signed the Consolidated Appropriations Act. This act extended existing federal solar tax credits through the next couple of years, meaning those interested in making the switch to solar could keep taking advantage of significant savings.
Why might the government offer a tax incentive for solar installation? The creation of other forms of electricity and power, via coal burning, oil, and natural gas, accounts for much of the carbon footprint of the country.
Encouraging residents of the country to switch to solar helps to battle pollution and combat the United States’ role in global climate change.
While the tax credit was intended to drop to 22% and then expire at the end of 2021, the Trump administration instead extended it at the current rate.
Incentives for Going Solar
So much can you save on your taxes by making the switch to solar? The current rate of return stipulated by the Consolidated Appropriations Act is 26% of the costs of installation.
If you had a system installed in your home and the total cost of the process was $20,000, the discount you could get on your tax return would be $5,200. That’s no small sum of money and can be a grand reduction of how much you owe.
That number also doesn’t include potential savings from state and local incentives. You can speak with local solar companies in your area who should be able to educate you about additional potential savings.
Who Is Eligible?
Who is eligible to take advantage of these federal tax credits? The requirements for eligibility have stayed consistent across many years.
The basic requirement is that your solar system must be installed within the year that the tax credit is active. The system must have been installed at a US home and you must be the owner and financier of it.
As long as you meet these simple requirements, you should be eligible for the tax credit come tax time.
Understanding Federal Solar Tax Credits
If you’ve installed a solar system in your home this year, you may be eligible for federal solar tax credits. The above information can help you understand how these tax credits work and just how much you can save.
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