How to File Your Federal Solar Tax Credit
Getting solar for your home is great, but it is even better with the federal solar tax credit, also known as that Investment Tax Credit (ITC). This is because the ITC, as of 2019 and until 2020, covers 30 percent of the cost of solar if you have taxable income. To get this credit you need to file for it. Below are the steps for this process.
When to File for Your Solar Federal Tax Credit
The Federal government sends out a new ITC form every year. This means you need to make sure you file the form for the year in which you had solar installed.
Typically the form for the current year is released by February of the following year. This form is normally provided by your personal accountant or included in tax software such as well known Turbo Tax or H&R Block.
Filling out the IRS Form 5695
When you are ready to fill out the form 5695 make sure it has the correct year in the top right corner of the page. If you had your solar array installed in 2018, the form should appear as it does below.
Once you have the correct 5695 form you will be ready to fill it out. Here are some step by step directions to help make this process easier.
- Enter the total cost of your solar array after incentives on line 1 of the form.
- Add the cost of any additional energy improvements. These are added to lines 2-4.
- Add all the totals on lines 1-4 and enter them on line 5.
- Multiply line 5 by the ITC percentage and put the answer on line 6 (for 2019 this is 30 percent).
- If you aren’t receiving a tax credit for fuel cells or carrying the solar credit from a previous year, put the value on line 6 on line 13 as well.
- Fill out the worksheet on page 3 of the 5695 instructions form to calculate if you can get the full tax credit in one year.
- Enter the results from your calculations on line 14 of the 5695 form.
- Put the lesser of the amounts on lines 13 and 14 on line 15. The amount on line 15 can be claimed this year.
- If your tax liability is less than your tax credit, subtract line 15 from line 13 and put this amount on line 16. Line 16 is the amount that you can claim the following year.
How to File the Form 5695
Now that you know how much you can claim on your federal taxes, it is time to file for your solar credit. Copy the amount recorded on line 15 of your 5695 form and put it on schedule 3 line 53 of your 1040 form.
This will transfer onto line 12 of your 1040 form. To ensure that this is filed correctly, have a tax professional fill this out for you.
You will want to keep your 5695 in your records along with your TC40 state and federal award letters. These records are proof of the year you purchased and installed solar. It is important to have proof of your date of install because the ITC is set to phase out. In result, the year you installed solar may have a different tax credit than the next.