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Here’s How To Claim The 30% Solar Tax Credit

Disclaimer: While we are one of the top solar installation companies in Texas, we are not tax experts. Because individual situations may vary, please consult a tax professional before filing for your solar tax credit.

A special solar tax credit is available for Texas home and business owners who install solar panels this year. Scroll down to learn about applying the tax credit on your upcoming income tax filing.

How to claim the solar tax credit for solar panel installations

The US federal government offers a tax credit to both home and business owners who install solar power systems. The Solar Investment Tax Credit is a federal tax credit worth 30% of the total system cost including installation.

How much is the solar tax credit worth?

The average gross cost of installing solar panels on a home in 2018 is $18,840. So the 30% solar tax credit would be worth $5,652 in this example. And that doesn’t take into account other solar rebates & incentives available in Texas, like Austin Energy’s $2,500 rebate or CPS Energy’s $25,000 rebate program.

Eligibility for the solar tax credit

Only individuals and businesses who own their solar power systems are eligible for the solar tax credit (financing is a type of ownership). If you sign a lease agreement, the third-party owner gets the solar tax credit associated with the system (and likely any additional utility rebates).

Claiming the solar tax credit

As a credit, you take the amount directly off your tax payment, rather than as a deduction from your taxable income. A tax credit is more valuable than a tax deduction because a tax credit reduces the tax you pay dollar-for-dollar whereas a tax deduction simply lowers your taxable income.

You can claim the 30% solar tax credit for your primary residence, and for other properties that you live at part of the year (vacation homes).

To claim the federal solar tax credit, you must file IRS Form 5695 for Residential Energy Credits as part of your tax return; you first calculate the value of the solar tax credit on that form, and then enter the result on line 53 of Form 1040.

Above image: Example of Form 5695 Residential Energy Credits, part of claiming the solar tax credit.

Above image: Example of Form 1040 Individual Income Tax Return, step 2 of claiming the solar tax credit.

If you end up with a bigger credit than you have income tax due, the excess amount may be carried forward to the succeeding taxable year (2019).

Note: The credit applies to the year in which you go solar. So only if you install solar panels before December 31, 2018 can you apply for the solar tax credit when you file your 2018 income taxes.  

If you haven’t gone solar yet, you still have until the end of the year to install solar panels so that you can take advantage of the 30% tax credit. View Alba Energy’s portfolio of solar installations across Texas, or Contact Us to request your free solar savings analysis.

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