Tax Credit Q&A
Q: Is a tax credit the same thing as a tax rebate?
A: No. Current solar tax incentives are tax credits – not rebates. Tax credits offset the balance of tax due to the government. Therefore, if you owe no tax, there is nothin to offset, and you can’t take advantage of it. Tax rebates are payable to the taxpayer even if they owe no tax.
Q: How much is the tax credit worth?
A: The Residential Renewable Energy Tax Credit can be worth up to 30% of the total cost of a solar installation. A taxpayer may claim a credit of 30% of qualified expenditures for a solar system that serves a dwelling unit located in the United States that is owned and used as the main residence by the taxpayer.
Q: When does the tax credit expire?
A: Because of a new extension by Congress, the 26% federal tax credit will be extended until the end of 2022, leaving you plenty of time to convert to solar and save as much as possible!
Q: How does a homeowner claim the tax credit money?
A: The homeowner will need to apply for the tax credit when filing their taxes. It does not happen automatically, and it is not guaranteed. Once it has been determined that the homeowner is eligible for the tax credit, they will need to fill out IRS Form 5695.
Q: What if a customer doesn’t pay taxes but wants to go solar? Can they take advantage of the tax credit and make their 30% Choice Balance Target?
A: Homeowners who do not pay federal income tax will not be able to take advantage of the solar tax credit. The Section 25D residential ITC allows a homeowner to apply the credit to their personal income taxes. It’s like running at tab at a local bar. If you haven’t been running a tab, you can’t take it off the tab at the end of the night when it’s time to pay. The 30% would need to come from another source of funds such as savings or state/local incentives.
Q: If a customer signs a solar sales contract this year, will they get the tax credit this year?
A: Homeowners can apply for the tax credits after their solar installation is placed in service. This means the system must be granted permission to operate in the previous tax year, but homeowners can always double check with their tax professionals for the best advice.
Q: Can the homeowner carry forward unused credits to another tax year?
A: Carrying forward unused credits to another tax year is another option if a taxpayer cannot claim all of the credit in the first year. A tax professional can advise whether a homeowner is able to carry the residential solar tax credit forward to the next tax year.
Q: Are the credits refundable?
A: The solar tax credits are nonrefundable personal tax credits. A taxpayer claiming a nonrefundable credit can only use it to decrease or eliminate their own tax liability. A taxpayer will not receive a tax refund for any amount that exceeds that taxpayer’s tax liability for the year.
Q: Where can the homeowner learn more about the solar tax credit?
A: There are many useful resources online, and any other questions should be directed to a qualified tax professional.
Frequently Asked Questions About Solar for Your Home:
How exactly does going solar and a solar system itself work?
How many solar panels do I need for my home?
Roof-size/available space: When we look at the size of your roof and the space available, we gather data that tell us the maximum number of solar panels your home or site can hold and we even consider shading. We use a software “Suneye” which takes a 360 picture of your roof and we use this photo to determine if your home is a good candidate for solar.
Energy Usage: When we determine energy usage we look at your past electrical bills from over the course of a year to make sure your system isn’t too big or too small.
Your Budget: We take your budget seriously and most importantly, we want you to be satisfied with our services. We take your feedback on how much you want to spend so that we can size your system appropriately.
What is solar net-metering?
Does Duke Energy offer net-metering?
Curious about the cost of a home solar system?
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Home Solar System
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Installing battery backup along with your solar energy system for home or business is a smart move and can increase the value of your clean energy investment as well as peace of mind when a grid outage occur.
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