Residential solar panels have never been more affordable. In fact, in the past decade alone, the cost of solar installation has fallen by 70%. Part of this reduction in installation cost has been down to the federal government’s solar tax credit.
If you are living in Kansas City and planning to install solar panels, you may be wondering, “How does the federal tax credit for solar panels work?” In this blog post, we will highlight everything you need to know about the solar panel tax credit and how homeowners can claim it.
What Is the Federal Solar Tax Credit?
The federal solar tax credit is a financial incentive for people who are interested in making the switch to solar energy. Until the end of 2022, the solar tax credit stands at 26%—representing significant cost savings upfront.
Originally, the tax credit had been due to drop to 22% for 2022, thankfully new legislation has been passed to keep it at the higher rate.
If you are interested in purchasing a solar panel system in Kansas City, we recommend that you don’t delay. The tax credit will drop to 22% in 2023 and is due to expire at the end of next year. While it is possible that the federal government will pass new legislation extending the tax credit, this has yet to be determined.
How Does the Federal Tax Credit for Solar Panels Work?
Homeowners who are interested in claiming the tax credit are required to complete form 5695 when they are making their tax returns. After calculating how much of a credit they are eligible for, this amount should be entered on form 1040.
Any homeowner who is liable for taxes during the year in which they installed their solar panel system will be eligible for the tax credit.
However, you must be the documented owner of the installed system. This means that if you lease a solar panel system from a solar company, it is the company that will be eligible for the credit, rather than you. For this reason, we always recommend that you purchase your solar panel system outright.
For more information on the 26% federal solar tax credit and how to claim it, speak to a reputable solar panel company near you.
Reap the Benefits of Federal Tax Credits This Year
Federal solar panel tax credits are part of the government’s strategy to increase the nationwide use of solar energy as we continue to shift away from fossil fuels. Today, homeowners in Kansas City are able to reduce the cost of solar panel installation by more than a quarter.
Given that the tax credit will drop to 22% next year and expire thereafter, now is the best time to make the switch to solar energy.
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