You may have recently heard from a marketing company trying to sell solar panels. These companies are actively working to get people on board, going door-to-door and making calls to convince people of solar panel benefits. It’s possible you’ve even spoken to more than one representative or received more than one piece of mail.
Their big sales pitch is that you can get a huge federal tax credit by getting a new solar panel system, but you had to act by the end of 2019.
Good news: you can STILL qualify for a large federal tax credit in 2020 by installing a solar panel system!
Salespeople may have told you that you’d lose out on this opportunity by the end of 2019, but that’s just a sales tactic. According to Michelle Davis, a solar-industry analyst, “Residential solar installers are notorious for using deadlines like this to create a sense of urgency with customers, and that’s definitely been the case this year.”
So whether you’re looking to add a solar panel system to your current home or are thinking of including one in a new construction, you can still get a federal tax credit in 2020.
The tax credit is a little bit less than it was in 2019, though, at 26% of purchase price and installation versus the 30% that it was last year. In 2021, the credit will be 22%, and after that, the offer really will be gone, at least for individuals. Businesses and home-based businesses will still be able to qualify for a 10% business tax credit for systems installed in 2022 and later.
So How Do You Qualify for a Tax Credit in 2020?
The official tax credit is called the Residential Renewable Energy Tax Credit. It can help you to save a good amount of money on the installation costs of solar panels or roofing.
Not sure how much solar panels actually cost?
To give you an idea, a typically-sized residential solar panel system includes about 400 square feet of solar panels. This usually costs $18,000. The tax break can cut that cost by anywhere between 4,680 and $13,320.
Because prices are different in different locations, you need to check with your local solar panel salesperson to determine what the cost would be for your home.
Why should I switch to solar panels anyway?
Switching to a solar panel system will allow you to use less energy from your utility company, saving you money and protecting the environment. Solar panels greatly decrease the demand for fossil fuels, and can sometimes allow you to sell the utility company the extra energy that your system creates.
A recent study showed that on average, residents with solar panels can save nearly $1,075 each year.
So if you’re on board to save money and do your part to protect the environment, here’s how you’ll get your tax credit in 2020.
The Renewable Energy credit allows you to subtract the credit from your total taxes mandated by the IRS. There is no top end limit on the price of your solar panel system.
This tax credit is not the same thing as a deduction. A tax deduction reduces your total income amount, but the credit is literally a credit. It’s unaffected by your tax rate. And if you’re unable to use the full credit in one year, you are able to carry it over to the following year.
It’s important to note, however, that not all types of solar panel systems are eligible for the tax credit. The systems must meet IRS guidelines. So here’s what you need to know:
You Can Get The Solar Tax Credit in 2020 For:
- The full bill of a qualified system, except the sales tax. This includes the solar panels themselves, labor costs, and the wires or piping needed to connect the system.
- The installation of a solar panel system in a primary or secondary house.
- A system purchased outright or with a loan.
- A solar panel system installed in a house you live in for at least part of the year. This includes a house that you rent out when you are not using it.
You Are Not Eligible for the Solar Tax Credit in 2020 If:
- The system was installed in a home in which you do not maintain residence.
- You leased (rented) the system.
- You use the system to heat a swimming pool or hot tub.
So, that’s the story.
If you’re ready to get your 2020 solar tax credit, make sure you do your due diligence in choosing a solar panel system. Shop around for a good deal, ensure your system is qualified by the IRS, and keep in mind all the qualification guidelines.