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Guide To The Federal Tax Credit For Solar Applications

Posted 3/3/23 | Filed under Solar Education | Comments (0)

If you are a U.S. taxpayer interested in installing a solar system in your primary home, the federal solar tax credit could potentially save consumers another 30 percent on the current solar system cost.

Not only that, if you’ve already installed a system in 2022, you should consult your tax advisor to determine if you are now eligible for an increased credit rate!

What Exactly is the Federal Solar Tax Credit?

The federal solar tax credit applies to the cost of solar systems installed by homeowners for their primary residences in the United States.

The incentive amount is equivalent to a percentage of the eligible costs. When the Inflation Reduction Act was signed on August 16, 2022, the Investment Tax Credit (ITC) expanded.

Those who install a PV system between 2022 and 2032 will receive a 30% tax credit. That will decrease to 26% for systems installed in 2033 and 22% for systems installed in 2034. There is no maximum amount that can be claimed.

What Expenses are Included?

The following expenses may be included:

Standalone batteries with a capacity rating of 3 kilowatt hours (kWh) and more may also be eligible beginning on January 1, 2022. You should consult your tax advisor to determine if such energy storage devices are eligible in your particular situation.

Solar PV panels or PV cells used to power an attic fan (but not the fan itself).

Contractor labor costs for onsite preparation, assembly, or original installation. Eligible costs and fees may also include permitting fees, inspection costs, and developer fees. You should consult your tax advisor to determine which costs and fees are eligible in your particular situation.

Balance-of-system equipment, including wiring, inverters, and mounting equipment.

Sales taxes on eligible expenses.

How Can I Find Out If I Qualify for the Federal Solar Tax Credit?

To learn whether you qualify to claim the federal solar credit, be sure to review the information listed by the the U.S. Department of Energy and consult your tax advisor.

How to Claim the Federal Solar Tax Credit?

Determine Eligibility - Consult with your tax advisor to determine if you are eligible for the credit and have or will have sufficient tax liability to utilize the credit.

Complete IRS Form 5695 - This form is available online and is used to claim renewable energy credits. Instructions on filling out the form are available here.

Add The Credits To Your 1040 - Once you’ve determined you are eligible for the Residential Clean Energy Credit and you have correctly completed Form 5695, you use the total credit from Form 5695 on your Form 1040 to reduce the amount of tax you owe.

Disclaimer *Qualifying battery storage technology of 3kWh or more must be installed by a connection to a dwelling in the United States, lived in by the taxpayer. You should always consult your tax professional to determine your eligibility for the Residential Clean Energy Credit under Section 25D of the Internal Revenue Code given your individual situation. EcoFlow does not guarantee any tax credit based on our products, and any information we provide is for educational purposes only and should not be considered legal advice. It does not constitute professional tax advice or financial guidance. It should not be used as the only source of information when making purchasing decisions, investment decisions, tax decisions, or execution. Consult a tax professional to evaluate your eligibility. Effective date: Jan 1, 2023
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