Determining Eligibility for the Solar Investment Tax Credit

With the 30% Solar Federal Tax Credit (ITC) coming to an end in 2019, a great deal of material is currently being published about it. The ITC is one of many valuable incentives to consider when converting to solar energy and there are many questions about how the tax credit is applied and which line items qualifies for the credit.

The Solar Tax Credit is a tax credit that can be filed one time for the tax year you install your energy system (Tax Form 5695). The credit amount is calculated as a dollar-for-dollar reduction of your federal tax liability. There is NO CAP on the dollar amount that can be claimed for credit for a solar installation.

In 2020, the Solar Investment Tax Credit (ITC) will drop to 26% and gradually decrease through 2022, at which point it will disappear for residential solar projects and permanently drop to 10% for commercial systems.

Property owners are eligible for the Solar ITC as long as they pay Federal Taxes. To qualify they have to have purchased AND have their solar energy system operational during the year that the tax incentive exists. After 2022, no residential PV system will qualify and commercial PV systems will be permanently capped at 10%.

The Solar Tax Credit is only applicable to products that directly correlate with installation and usage of a solar energy system. Specific products include things such as the solar panels, racking/mounting equipment, inverters, wire, conduits, junction boxes, etc. A storage battery system can also be included if it is directly connected to the applicable PV system.

The labor fees to get the system installed is also falls under the tax credit umbrella. This includes the costs to design the system, panel installation, electrical work (as it relates to the solar energy system), inspection fees and permitting fees. Sales and usage tax on any of the PV system’s products and labor are also eligible.

There are many actions a property owner can take to be greener and more energy efficient. However, unless the products and labor of these improvements are part of your solar energy system, they do not qualify for the 30% Investment Tax Credit. Examples of line items that do not qualify  for the tax credit are things such as stand-alone thermostats, sealing windows and doors, insulation, upgrades to existing HVAC system or standalone battery chargers.

The cost of installing a new roof is more ambiguous in terms of whether or not it is eligible for the PV Tax Credit. Typically, it is not eligible if the solar array covers less than 50% of the new roof.

A Geoscape Solar Advisor will be able to help determine the maximum amount of qualifiers that can be claimed for ITC eligibility based on the specific factors of both your project and your property.

To discover more, we also recommend this post: “Solar Federal Tax Credit: What Is and Isn’t Eligible” from our Amicus Solar Partner – Southern Energy Management in Raleigh, NC.

If you’re considering going solar, don’t delay in setting up a complimentary property analysis with Geoscape Solar. Residential Solar Installations typically take 3 – 4 months from the time a property owner signs a contract. Make the most of your solar tax credit dollars by getting your solar energy system up and running before the end of 2019.