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Wednesday, September 18 2019 @ 07:50 pm EDT

Take Advantage Of The Federal Solar Income Tax Credit - Before It Goes Away

Right now, if you go solar the Federal Government will effectively pay for 30% of your entire system. Sweet, right? There are several things you should know about this incentive, how to take advantage of it, who qualifies, and when it's going away.

Federal ITC: To keep things simple, for the duration of this article I'm going to refer to the Federal Solar Income Tax Credit as the Federal ITC. For residents of New York state there are two other state level incentives you can qualify for, but again for this article I'm going to focus on the Federal ITC only. And, I will refer to it as the Federal ITC from here out. Housekeeping, done.

When Can You Claim The Federal ITC? The owner of the solar system can claim the Federal ITC. So, if you are purchasing your system the Federal ITC goes straight to you. If you're leasing a solar system you don't own it, the leasing company does. Typically they get the Federal ITC and then "pass through" the savings to the customer in the form of a lower lease payment. Those savings are built into the basic math when you decide to lease.

How Much Is It? Short answer - depends. It's based on the cost of your system. Just using rough numbers as an example, let's say the total cost of your solar system is $21,000. There's another NY state incentive that comes off the top (will be discussed in a later article) which reduces the cost to about $19,000. The Federal ITC in this case would be 30% of $19,000 or $5,700.

Do You Have The "Tax Appetite" For The ITC? This incentive is based on the Federal Income Taxes we all file every year. I'll use my tax return as an example. Last year my wife and I owed about $6,000 in Federal Income taxes. The government withheld about $5,600 during the year from our paychecks. So, once our accountant did all the math we ended up owing Uncle Sam about $400. Now, go back to the solar system example above - a $21,000 solar system that generated a Federal ITC of $5,700. In my case we owed Uncle Sam $6,000. The Federal ITC functions as if $5,700 had already been paid in federal taxes. So, after that tax credit my remaining tax liability would be only $300. The government withheld $5,600. Take out the $300 I owe them, and I would have gotten a refund for $5,300. Sweet!

Confused Yet? I know, this stuff is clear as mud. It's the sort of thing you either get or you don't. I hate doing taxes. The only thing I hate worse than filling out tax forms is actually having to write a check to pay taxes. That's why I have an accountant, to do that stuff for me. But in the case of the Federal Solar ITC, it's worth it to figure out if you have the "tax appetite" to claim it.

Pay No Federal Taxes? I had one customer who was a retired NY City police officer. He was medically retired and disabled. He was a motorcycle cop who was involved in an accident that messed him up. As a result he has income, but all of his income is tax free. This makes sense because all of his retirement and disability pay comes from the government anyway, so why would they take it back in the form of taxes. But in his case, the bottom line states - no tax bill = no tax credit. If your federal tax bill is so small that you won't be able to claim the credit, then it makes no sense for you to go solar.

5 Years To Claim: You can claim the Federal ITC over a period of five years, if you don't have enough of a tax appetite to claim it all in one year. Going back to the example, let's say I only owed $3,000 in federal taxes to the IRS this year, and the same next year. So, when I file I would get $3,000 this tax year, and the remaining $2,700 the following year. It doesn't go away or expire once you've qualified but it still functions like a tax credit, and you have to have the "tax appetite" to claim.

Federal ITC Phase Out: This year, 2019, is the last year you will be able to claim the full 30% of the Federal ITC. It's being phased out over the next three years. In 2020 it will drop to 26%. Then in 2021 it will drop to 22%. Then in 2021 it will be eliminated, with a 10% credit only available to commercial businesses. So, if you've ever thought about going solar, this is the year to do it.

Qualifications: So to qualify for the Federal ITC you have to:

  • Own your own home.
  • House roof exposed to the sun (not buried in trees and shade).
  • FICO score of 650 or above if you want to finance (or you can self finance or pay cash).
  • Pay federal taxes and have the tax appetite to claim the incentive.
  • Buy (own) your solar system, not lease.

Want To Save Thousands Of Dollars? Then give me a call or text (845) 800-6925. You can also send me an email.

  • We only use the highest quality SunPower solar panels.
  • They are covered by a 25 year warranty
  • We are a local company - we live and work in the Hudson Valley.
  • Hudson Valley Solar is Military Vet / Disabled Vet owned and operated.
  • The 30% Federal Solar Tax Incentive ends this year, completely phased out over the next two years.
  • Take advantage of existing $5,000 NY State Tax Incentive.
  • NYSERDA incentive covers the cost of installation.
  • No money out of pocket, no down payment or deposit required.
  • See O&R Electricity Rates Going Up, Again - Divorce yourself from the utility company.
  • See What's Up With Those "Solar Farms" Anyway... - Divorce yourself from the utility company.

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