You have probably heard that the federal solar tax credit can reduce your out-of-pocket expenses if you are considering installing solar panels on your home or business. But just how does the solar credit work? How much money can you really save?
How much can you save with the Federal Solar Tax Credit?
In general, the investment tax credit allows up to 30% of the cost of a solar photovoltaic (PV) system and its installation. The fact that it is a tax credit, rather than a rebate, means that you need to have a tax bill against which to offset the credit. The federal solar tax credit currently may be carried over for five years until 2016. So, if you owe less in taxes for 2010 than the value of your solar tax credit, you can carry over the remainder to apply to the next 4 years of tax bills.
If you have installed solar panels on your home (your primary residence) or are planning to do so this year, consider this information:
A typical residential solar PV array is 5 kilowatts (kW), with is estimated to cost $41,000 ($8.20 per watt), including installation. Thirty percent of that cost, which would be the federal tax credit, is $12,300. If your family earns $60,000 a year, the estimated federal income tax is about $2,500, which means the federal tax credit could essentially reduce your tax burden to $0 over the next 5 years. Those who earn less may not be able to claim the entire credit if they do not have a large enough tax bill against which to offset the credit.
If solar PV panels continue to drop in cost, the number of people who will be able to capture the full credit for a given system size will increase. Yet, some commentators believe that new incentive schemes should be adopted so that returns on solar investment are not dependent on the tax code. Tying the rebates to renewable energy generation may provide better renewable energy incentives.
Tags: federal solar tax credit, solar incentives, solar panels, solar power, solar pv panels, solar tax, solar tax credit
February 10th, 2011 at 2:41 pm
This is great information, but still disappointing to read that you have to make a certain amount of income to benefit from the tax credit. It is unfortunate that people who need it the most might not get it.
March 26th, 2011 at 10:47 am
I would like to have some information on how retired people can get federal tax credits for solar energy if they don’t have any tax liability
March 31st, 2011 at 4:10 pm
Hopefully incentives as rebate or Tax credit will definitely increase the popularity of solar power use. It’s important to make it available for a majority of people. Nowadays, solar energy is one the greatest opportunity for our planet.