Federal Solar Tax Credit 2020: Step By Step Guide explains exactly how the Federal Solar Tax Credit Works? More importantly, learn if it will work for you?
Any tax credit earned by installing solar ( The Investment Tax Credit ) (ITC), allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value.
*The ITC is 26% for a 2020 purchase of home solar and 22% for a 2021 purchase and that is the end of home solar Federal Tax Credit.
The Federal Tax Credit Is Quite Substantial
In 2020 the investment tax credit for solar systems in Florida is 26%. If your system cost is $20,000 your tax credit is $5200. The net cost of your system is $14,800. How do you actually receive that $5200 is the real question?
Here’s how the Federal tax credit works, you deduct the tax credit from your actual taxes owed or pre-paid. So if you owe or have pre-paid $5200 in taxes for the year 2020 and your tax credit is $5200, you owe nothing in taxes. If you pre-pay your taxes then you will get a $5200 refund.
Now if your taxes were $2,100 and your tax credit is $5200 you can carry forward the difference for up to five years. Although you saved $2100 in 2020 you can still deduct the tax credit the next year. You can use the tax credit until you have reached $5,200 but you have only five years to exhaust it. After 5 years if there is any unused claims for any part of the tax credit it’s unclaimable.
Cash Is King When It Comes To Solar
You’re better off purchasing your system during a high earnings year because of financing interest. For a multitude of reasons not only because you can use your tax credit all at the same time. In a high earnings year, you can buy your Solar System for cash and possibly realize as big a savings if not bigger than the tax credit. Because when you pay in cash the savings on Interest are quite substantial in addition to the tax credit.
The truth is if you can afford to pay cash, solar is a no-brainer because you’re saving money every month. Your saving money every month for the next twenty-five years or longer. This doesn’t mean a financed system is not a good investment. If you buy right even financed systems offer huge savings because you’re paying the power company every month.
Be Cautious With Solar Companies
When a solar company is presenting you a solar proposal quite often they’ll include your tax credit in the deal. This is important to know because they can’t control when or how you receive your tax credit. They also can not control what you do with your tax credit or if you qualify for it. Should your tax credit be included in your deal it is then expected for the buyer to pay that tax credit to the finance company. The trick they use to disguise what their up to is your loan is interest-free for the first 15 months. Then all of sudden because you didn’t pay that tax credit money toward the solar system the payments go up.
Most Purchases of Solar Financed Receive 2 Different Payments From Solar Companies
Should you not pay the tax credit to the finance company your solar payment will be higher than your power bill your off-setting. Most financed deals give you interest-free for the first year. The reason is you don’t receive a tax credit for up to a year from the time of purchase. So the finance company wants to give you ample time to include your tax credit into the deal to lower your payments. The idea being to off-set what your power bill was and to help you to realize immediate savings.
The problem is a lot of people don’t understand this part of buying solar. Basically the solar companies use your tax credit as a down-payment for your purchase.
If you don’t pay the tax credit money to the lender your system becomes a 100% financed system because there’s no down-payment. Basically the solar companies use your tax credit as a down-payment for your purchase.
Do You Have Faith In Solar?
The biggest challenge is that most folks don’t believe that solar panels will last for twenty-five years or more? The truth is they are designed to last for forty years or more and are storm tested.
The best clue you have for how long solar panels last is the power companies are using the exact same panels. They wouldn’t be making such a sizable investment into solar farms if the technology wasn’t sound. Also, the banks wouldn’t do 20-year financing if the equipment didn’t last that long.
So if a solar payment is at or below your power bill there really is no reason not to go solar. But if you buy your equipment wholesale the cost of solar is substantially less and you can make a profit.
At a minimum, you’re helping the environment with no additional expense by off-setting power bills. Buy right and you will more than likely realize substantial savings by going solar.
How Do I Apply for And Receive My Solar Tax Credit?
An uncapped 26% federal tax credit on residential solar electric (PV) systems remains in effect through the end of 2020. Because the tax credit goes to 22% next year now is the best time to go solar the cheapest
2021 has a step-down to 22%, and the tax credit is currently scheduled to end completely in 2022. In 2020, businesses can get a 26% federal investment tax credit.
Include The Tax Credit In Your Tax Filings
Also, use Form 5695 to take any residential energy efficient property credit carry forward from 2018. Or to carry the unused portion of the credit to 2020. You may be able to take the credits if you made energy-saving improvements to your home located in the United States in 2019.
Provide “Your Solar Advocate ” With The Average Monthly kWh’s and Get Your Free Cost Estimate
“Your Solar Advocate” does not share your information with anyone under any circumstances without your consent. Personal information is not required throughout the entire process of going solar. “Your Solar Advocate” does not require your social security numbers, driver’s license numbers or Credit Checks!
“Your Solar Advocate” uses your information for Advocacy purposes only, to serve you better. We do not Sell Solar we provide expert knowledge about Solar to assist you in Going Solar for a lower cost! Assistance with purchasing equipment, permitting & Design and Installation.
Because we are your solar advocate, we do not make purchases, we make the arrangements for you to make the purchases. All for one fee regardless of the size of the system.
We act strictly as an expert solar advocate for you. We inform you of the most important things you need to know such as the size of the system, the best location of the system, wholesale prices on different size systems and expert installation.
The list of services goes on, but the bottom line is the bottom line. Including our advocacy fee, you will save a bare minimum of $6000 for any 7K home solar system or larger.
The larger the system the more you save because we do not raise our fee regardless of the size of the system.
Be Sure To Check-Out: A Power Bill Is A Free Investment: Explained