If you’ve been staying abreast of the tax savings that the Federal Solar Tax Credit (officially known as the Investment Tax Credit), you may already know that there are some changes coming now that 2019 is over. This has many solar-curious Massachusetts homeowners wondering, “Will the federal solar tax credit be available in 2020?”
YES — and at a rate of 26%. Here’s what you need to know about this solar panel tax credit in 2020, how it has changed, and how you can cash in.
How Much is the Solar Tax Credit in 2020 and Beyond?
This year in 2020, that federal tax credit is worth 26% for homeowners and businesses. In 2021, the federal tax credit will reduce to 22% and in 2022, it will be eliminated for homeowners but remain at 10% for businesses.
So, what does that 26% tax credit savings look like for the average solar installation here in Massachusetts? Let’s take a look.
How To Claim the Solar Tax Credit
All these percentages don’t mean much if you can’t apply them to what a solar installation actually costs! So:
After your solar installation is complete, simply add up all of your solar related costs. From there, take 26% of those costs, and subtract that number from what you owe in federal tax liability.
As an example, we will use the average cost that we see for most of our customers from the North Shore to the South Shore, of $35,000 for a residential solar installation.
26% of $35,000 = $9,100 in tax credit savings
Come tax time in April of 2021, follow these simple instructions:
1) Keep all receipts related to your solar installation project
2) Obtain and fill out an IRS Form 5695.
3) Add your renewable energy credit information to your typical IRS Form 1040.
“What Happens if My Solar Tax Credit Is More Than What I Owe?”
So what happens when your federal tax liability* is less than the total deduction from your solar installation? Let’s say at the end of 2020, you owed the Federal Government $5,000 in taxes. Taking the above example solar tax credit of $9,100, your Federal taxes are $0 for 2020, leaving $4,100 leftover from the tax credit. Fortunately, you can roll that remainder over into next year’s taxes, reducing your 2021 Federal Taxes as well. This is to ensure you get to utilize every cent of this solar incentive.
*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.
But Wait… There Are More Savings Available!
If you’ve heard about the solar tax credit, you may also know about the SMART incentives available to Massachusetts homeowners and businesses who power their homes or commercial properties with the renewable energy of solar. So, will solar SMART income be available in 2020?
The Answer: As long as there are SMART Program Incentive Blocks available in your utility area, you can take advantage of the added income your solar installation can generate for you. This could mean savings on average of $8,000 up to $15,000 per system over the next 10 years.
Plus, the state of Massachusetts is offering an additional $1,000 state tax credit for solar installation, further reducing the total cost of installing solar this year for your home or business.
Let’s take a look again at the average price of a solar energy system of $35,000. When you add up the savings from the federal solar tax credit + SMART incentives + state tax credit = $18,100 in solar savings!
Curious about the Real Cost of Solar Installation? Ask Us.
As the number one Massachusetts based solar installer, there is no other contractor more qualified to answer your questions about how you can reduce your installation costs through the Federal Solar Tax Credit, state solar tax credit, and SMART incentives. If you are looking to go solar the “smart” way, get in touch with our team today!
Looking to go solar the “smart” way? Schedule a free solar quote with Boston Solar today. Call us at 617-858-1645 or get in touch here.