DIY Solar Kits: How to Claim Your Federal Tax Credit Posted on 16 Nov 08:30
If a DIY solar kit is in your future — or if you’ve recently installed your system — the federal solar tax credit is an important part of your overall cost-savings strategy.
The federal solar tax credit is the single most significant financial incentive available today. It saves you a full 30 percent of the cost of your solar kit, with no maximum limit.
So how do you claim this lucrative federal solar investment tax credit?
Determine the Net System Price for Your DIY Solar Kit
As with all federal tax-related subjects, the IRS has implemented a strict set of rules regarding the solar tax incentive. The first consideration is the claimed cost of your photovoltaic system, as you can only claim the amount allowed, based on your net system price.
So, what does “net system price” mean?
Let’s say you buy a DIY solar kit for $20,000. Later, you apply for and receive a rebate of $4,000 from your local utility company or the panel manufacturer. The net price of your photovoltaic system, then, would be $16,000. And that’s the amount you can claim for the solar ITC.
In this scenario, you would be eligible for a $4,800 federal tax credit.
If you calculate incorrectly and claim the gross system price of $20,000, your credit total would be $6,000. In that case, however, the IRS would consider the $4,000 rebate you received as income and you would be taxed accordingly.
So to avoid getting a tax bill in the mail, make sure to subtract all of your state and local incentives when claiming the federal credit.
Claim the Federal Solar Tax Credit When You File Taxes
To get the tax credit for your DIY solar kit, you’ll need to file a federal income tax return for the year your system went online. And because it’s a tax credit, you must owe the IRS money to take advantage of the federal incentive. Unlike a rebate, the IRS isn’t going to send you a check.
Looking at the example above, your $4,800 credit will directly offset any taxes you owe. Let’s say you owe $5,000. In that case, the full federal ITC would apply this year, and you would only have to pay the remaining $200.
What if you owe less than the solar ITC amount? What happens if your tax credit total is $4,800, but you only owe, say, $3,000? In that case, the remaining $1,800 can be rolled over and claimed on next year’s income taxes.
Getting Help with Your Federal Solar Tax Credit Paperwork
Do you usually file your own income taxes?
If so, you may need a little extra help the year you install your DIY solar kit. If you make a mistake, you may not qualify for the full solar ITC. Consulting a CPA or tax professional is always a wise idea, especially considering the significant value of the ITC.
However, if you just need assistance with the Residential Energy Credits form itself, Solar GOODs can help.
We know how to make sure that you get the maximum federal solar tax credit for your DIY photovoltaic system installation. And that’s why we offer assistance with document preparation for your federal paperwork.
Solar GOODs is the premier do-it-yourself online superstore. We have everything you need in one secure, easy-to-use website. Visit us today to learn more about saving money with a DIY solar kit.