written by Jennifer Cochran
To encourage Americans to use solar power, the Internal Revenue Service and the Department of Energy offer tax credits for solar powered systems. If you install Energy Star-approved solar power systems before the end of 2022, you claim 30% of the cost as a tax credit for the year installed.
As a credit, you take the amount directly off your tax payment rather than as a deduction from your taxable income. You can claim the credit for your primary residence, a vacation home, and for either an existing structure or new construction. This credit in not available for rental property, but there is no limit to amount of the credit; the amount is 30% of the total amount spent on the system. It is a nonrefundable credit. This means if all the credit is not used in the current year, it has to carryforward to the next year.
The following are the requirements to qualify for the credit:
- Individual taxpayers must make the expenditure for qualified solar electric property
- Qualified solar electric property must use solar energy to generate electricity
- Electricity must be for use in a dwelling unit
- The dwelling unit must be located in the United States
- The dwelling unit must be used as a residence by the taxpayer
- It does not have to be the taxpayer’s principal residence
The qualified solar property includes:
- Solar panels
- Onsite preparation
- Labor to install and assemble
- Piping and wiring to interconnect such property to the dwelling unit
This credit should not be confused with the credit for non-business energy property. For property placed in service through 2016, a tax credit is available for non-business energy property that meets the requirements for qualified energy efficiency improvements and residential energy property expenditures including furnaces, central air conditioners, water heaters, certain heat pumps, and biomass stoves.
If you have any questions about qualified solar electric property credit, please contact us 417-881-0145.