Looking for a good reason to make the switch to solar? If a dramatically reduced electric bill every month isn’t reason enough, you could also benefit from other great incentives including tax credits. Odds are you’ve probably heard about the Residential Renewable Energy Tax Credit, otherwise known as the Federal Investment Tax Credit, or ITC for short. Let’s take a look at how this incentive works.
Reduced Tax Burden
The Federal ITC is available through the end of the year 2019, and in the years following will be gradually stepped down, which means now is a great time to consider making the switch to solar. Essentially, the ITC allows you to claim up to 30 percent of the price you pay to install your solar panels as a credit on your taxes for the year in which the panels are installed. There is no maximum dollar amount you can claim, which is great for those who wish to make a significant investment and purchase a large solar panel system for their home.
Many people think that this tax credit shows up in their refund every year or they somehow receive a check from the government once they file their taxes. This isn’t how this credit works—instead, you see the savings immediately when you complete your federal tax return for the year. The amount of your credit is applied towards your tax burden for the year, which then leaves you with a significantly smaller amount you owe.
Let’s look at a few simplified examples. Say you spend $10,000 installing your solar panel system, and you have a tax burden of $15,000 at the end of the year. You would be allowed to claim up to $3,000 of your panel installation costs, reducing your tax burden to just $12,000. When you consider much of this will have already been withheld by your employer through payroll, you will owe very little, if anything!
Now say you spend $20,000 and you have a tax burden at the end of the year of just $6,000. In this instance you’d be allowed to claim a credit of up to $6,000 on your taxes. Since the ITC pays for your entire tax burden, you would owe nothing and be allowed to claim arguably your full tax refund.
Investing in solar is not only good for your home by reducing its carbon footprint and increasing its value, but it’s also good for your wallet by saving you money on your utility bills. Likewise, this investment could have a substantial return by saving you a bundle on your tax burden for the year!Call the New Jersey solar installers from Sea Bright Solar at (732) 253-4052 to find out what kind of solar panel options are right for your home!