Residential Solar Tax Credits – What You Should Know Before Filing in Massachusetts
Apr. 11, 2017
Posted: Tuesday, 4/11/17 @ 3pm EST
Ok, I admit, this post is a tad bit late because I forgot about taxes until last weekend. I know, it’s the same every year, get your taxes post marked by the April 15th (or the Monday after); but somehow, this year, between work, family and play, it completely slipped my mind. However, I did happen to get them done – and it was quite the return, thanks to installing a 6.5kW solar panel system on my roof.
DISCLAIMER: While this blog post discusses solar tax credits and filing your returns, you should ALWAYS consult your tax professional for your specific situation. We do not assume responsibility for your tax situation or credits.
Federal Tax Credit Eligibility
- Your system must be installed prior to the tax year you are claiming.
- NOTE: The residential 30% solar tax credit was passed as part of the 2009 American Recovery and Reinvestment Act. The 30% rate is extended through 2019, after which it will fall to 26% in 2020, 22% in 2021 and 10% in 2022. The state tax credit doesn’t yet have an announced deadline.
- You must own your home.
- You must pay enough taxes to the Federal/State Government to qualify for a tax credit.
- You must own your solar panels via outright purchase or a loan (those that have a lease or PPA in place for their solar panels do not qualify for tax credits/incentives).
- Use the date the utility interconnection occurs, meaning the date your system is turned on/commissioned, not the date it was installed.
- For example, If your system was installed on 12/15/16, but it wasn’t turned on and producing power before 1/1/17, then you cannot claim the tax credits on your 2016 taxes for filing by 4/18/17. The credits will need to be claimed in 2018.
- If a homeowner does not want to redeem the full 30% tax credit, as of 2014, he/she may carryover to help monetize as much of the solar tax credit as possible.
What are the tax incentives for installing solar panels in Massachusetts?
- 30% federal tax credit
- This is a dollar for dollar tax credit equal to 30% of the total cost of a solar panel system
- Up to a maximum of $1,000 Massachusetts state tax credit. This credit is the lesser of:
- 15% of the net expenditure for your solar panel system or
What do these tax credits really mean for the average solar customer?
Here’s an example.
Sally Solar Panel purchases a solar system for $25,000. 30% of that is $7,500 and 15% is $3,750.
On Sally Solar Panel’s federal tax return (form 5695 – complete instructions located here), she can claim a $7,500 tax credit. If she had enough federal tax liability, she will be able to claim the full 30%.
On her state tax return, she can claim the full $1,000 since it’s less than 15% of the total system cost (as long as she has enough state tax liability).
This article does not discuss the SREC incentive for owning a solar panel system, quarterly SREC payments, or how to claim them. This article describes the tax credits solar panel system owner may receive. Remember, everyone’s tax situation is different, so please consult a tax professional.
Director of Marketing at Boston Solar