What is the Solar Tax Credit?

/ Planning Within Reach, LLC/

If you are considering transitioning to solar energy for your residence, you may qualify for a federal tax credit. 

VIDEO: WHAT IS THE SOLAR TAX CREDIT?

The amount of the credit depends on the year that the qualified solar system is placed into service.

  • 2020, the credit is 26% 

  • 2021, it is 22% 

  • 2022, the credit is 0%

The credit is scheduled to expire on 12/31/2021 unless it is extended.

You do not receive the credit if you lease the solar panels - you need to own them. The IRS explicitly excludes panels used to heat a pool or hot tub.

How to take the solar tax credit.

The solar credit is in fact a credit, not a deduction to your income. That means you will calculate your tax due and reduce that number by the credit amount.

Notify your tax preparer if you end up installing solar panels to make sure you receive your tax credit. 

This will require them to complete IRS Form 5695 for you and to file it with your 1040.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.