Unlocking Solar Savings: Understanding Eligibility for Federal Tax Credits

Questions About Your Eligibility for a Solar Tax Credit? 

Here at Elite Roofing & Solar, our goal is to help our customers get the most from upgrading their home and taking control of their energy usage. That includes keeping our customers informed about eligibility and availability of the various solar rebate, incentive, and tax credit offerings.

The Federal Tax Credit for solar panels remains the most significant incentive available for homeowners, but eligibility may be unclear if it’s your first time looking into this rebate. So to help clear up any confusion, we’re breaking down the eligibility requirements for the solar tax credit. Let’s get started!

What Does the Federal Tax Credit Offer?

First, let’s take a look at the rebate itself. The federal solar tax credit was expanded as part of the Inflation Reduction Act of 2022. Also called the Solar Investment Tax Credit (or ITC), this incentive provides qualified homeowners with a tax credit for up to 30% of the cost to purchase and install a new photovoltaic (solar) array for their home.

Crucially, this is a tax credit, not a tax deduction. This means, rather than reducing your taxable income, this incentive is a direct reduction on your taxes owed—a much more significant rebate. 

What Are the Eligibility Requirements for the Solar Tax Credit?

The solar tax credit is available for those purchasing new solar equipment for their primary residence for the first time. This includes homeowners, but it also includes renters, who “may claim the residential clean energy credit for improvements” to their main home, according to the IRS website.

In order to receive the tax credit, you must have taxable income. The rebate is not available as a separate payment and may only be disbursed as a credit against taxes owed.

Exceptions to Solar Tax Credit Eligibility

Eligibility for the federal solar tax credit is fairly straightforward. However, there are several exceptions to this program that may leave some homeowners ineligible. Here are a few of the most common cases where individuals may be ineligible for this credit.

Those with no Taxable Income

As mentioned, the solar tax credit is only available as a credit against taxes owed. This means that those who have no taxable income will not be able to take advantage of this incentive.

However, payments may be spread out across multiple years, through the full ITC term, which runs until 2033. In other words, those with no taxable income this year, or with a tax bill lower than the rebate they would receive, will be able to split the payment to receive the full benefit.

Those Who Have Already Purchased Solar

The solar tax credit is only available to those purchasing a new solar array. If a homeowner already owns a system they previously installed, they will likely not be able to qualify for this rebate. 

For homeowners purchasing a home with solar panels installed, they may retain eligibility for the solar tax credit if they decide to add to the existing solar system.

Discuss Your Eligibility with a CPA

In general, the above details should help to clear up any confusion for homeowners regarding their eligibility for the federal solar tax credit. However, exceptions exist to many of the scenarios described above. It’s best to consult with a financial expert (such as a CPA) to more concretely determine your eligibility before deciding whether to purchase and install a new solar system for your home.

Ready for Solar? Get in Touch with Elite Roofing!

Elite Roofing & Solar is one of the select few Colorado roofing and solar companies with an in-house solar installation team. This enables us to streamline the process of preparing your roof for solar, completing your installation, and providing a final inspection and warranty to maximize the lifespan of your solar array—and your roof.

With all the incentives available to homeowners, there’s never been a better time to go solar. Schedule a consultation with our team today to get started!

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