If you're a Florida homeowner who recently purchased a solar system for your home, you may be wondering about the solar tax credit changes and what they mean for you.
What is the Solar Tax Credit?
A tax credit is a one-for-one dollar amount reduction from income tax that you would have paid without the credit.
The federal solar investment tax credit (ITC) reduces your income tax in exchange for going solar.
This tax credit allows homeowners to deduct a portion of the cost of installing a solar system from their federal taxes. Since 2006, the ITC has been a key driver of the solar industry's growth in recent years and will continue to do so thanks to new changes.
Here's what you need to know.
What’s New in 2023?
First, the good news: the solar tax credit is still available, and it remains a powerful tool for homeowners looking to install solar systems.
The tax credit was set to phase out in 2023, but in August of 2022, the Federal Government signed the Inflation Reduction Act of 2022 into law. Among numerous climate-conscious consumer and industry incentives, the most impactful is the increase, expansion and extension of the Residential Clean Energy Credit—also known as the Solar Investment Tax Credit (ITC).
Solar Benefits Have Increased: The biggest update to the solar credit is the amount of credit you can apply against your income tax has been raised from 26% up to 30%.
Solar Benefits Have Been Expanded: The new law expands the covered expenses to include the cost of the solar panels and their components, sales tax, permits and other fees, essential wiring, inverter systems, hardware, site prep and installation charges.
Solar Benefits Have Been Extended: The solar tax credit has also been extended until 2032 before it begins to phase out in 2033. At that time, the credit amount steps down to 26%. In 2034 it will be reduced even further down to 22% and eliminated for the tax year 2035.
How Do I Claim the Solar Tax Credit?
If you installed a solar energy system in the 2022 tax year, the good news is the tax credit is retroactive and can be used towards your upcoming taxes.
Eligibility requirements to receive the Solar Tax Credit include:
- The solar power system is an original, new installation or is operational for the first time.
- You own the solar power system outright or have financed the parts and installation with a loan.
- You aren’t leasing the solar power system or paying anyone for the energy created by the system.
- You’re claiming the credit based on the cost of the solar power system, its components, installation and fees. Items and appliances that operate on the created energy aren’t included in this tax credit.
Consult your tax accountant to ensure your eligibility and for exception information. You’ll need to complete and include Form 5695 with your federal tax return for the tax period in which the solar power system is first installed and made operational.
When Should You Go Solar?
So what does this mean for Florida homeowners who want to install solar systems? Simply put, it means that solar is a great investment right now. If you're thinking about installing a solar system, it's in your best interest to do so sooner rather than later, while the tax credit is still available at a high rate. The credit can help you take advantage of the many benefits of going solar.
Benefits of going Solar
- Installing a solar system can help to lower your energy bills and
- Going solar reduces your carbon footprint
- Solar adds value to your home
Overall, the solar tax credit changes are an important consideration for any Florida homeowner who is interested in saving money on their home energy bill by going solar. As energy bills continue to skyrocket, understanding the changes and acting quickly to take advantage of the tax credit will make living in your Florida home more affordable for you and your family.
Call Florida Solar for a Free Quote
For over 40 years, Florida Solar has installed residential and commercial solar panels and pool systems. We are the area’s premier solar installation company because we will:
- Schedule a free solar savings consultation
- Develop your custom solar design
- Handle the permitting
- Install your system
We’ve helped people like you throughout the Tampa Bay area enjoy the benefits of lower energy costs. Read the great things they have to say about working with Florida Solar.
If you’re interested in adding a solar energy system to your home, contact us for a free quote or call us at 727-513-3873.