The Solar Investment Tax Credit Sounds Great, But Is It Really?
Some things to consider before you purchase a solar power system
Late last year, the U.S. Congress passed an extension to the renewable investment tax credit (ITC). The ITC gives homeowners the potential to receive up to 30% of a purchased solar system’s cost back on their taxes. It sounds like a great idea: make the right choice and get some money back. But it doesn’t always work out that way.
For starters, not everyone is eligible for the tax credit. Only people who file a tax return and pay federal income tax qualify and that’s not as many people as you might think. According to the Tax Policy Center, a little over 45% of Americans either did not file a tax return or pay income tax in 2015 and that’s not just the unemployed and underemployed, it also includes people whose deductions, like child and mortgage interest tax credits, outweigh their income tax.
Even if you do pay income tax, you may not get the full 30% of the ITC at one time. As a tax credit, the ITC is non-refundable, meaning that if the tax credit is more than what you owe in taxes, the difference will need to be carried over to the next year. So if you owe $2,000 in taxes and your tax credit is $7,500, you won’t get a check for $5,500. Instead, you’ll need to wait another year and file for the balance of your ITC. If that’s the case, it’s recommended you enlist the help of a tax professional to ensure you take full advantage of the tax credit.
Furthermore, as with anything tax-related, timing is important. The ITC can only be claimed once your solar system starts producing electricity. So, even if you start paying to have a system installed in late 2016, but it does not produce electricity until 2017, then you’ll need to wait until 2018 to claim it on your taxes.
Finally, it’s important to know all of your options when it comes to solar. You may think that, in order to take advantage of the ITC, you need to buy a solar energy system outright. But that’s not the case. Sunnova’s EZ Own plan allows you to own the system with no upfront cost and an equipment warranty to ensure your system is producing for many, many years. If you’re looking to take advantage of the ITC, but aren’t ready to invest in a solar energy system, EZ Own may be ideal. To learn more about Sunnova’s EZ Own plan, simply click here or give us a call at 855.277.6379
In a future blog post, we’ll cover the importance of having a warranty on your solar energy system. So stay tuned.
* Sunnova does not provide tax advice. Contact your personal tax advisor for information regarding the federal investment tax credit eligibility.