Don’t Forget Your Solar Incentives When Filing Taxes

Solar ROI
Is the Solar Tax Credit Refundable?

Most dread tax season, but if you have solar, you’re in for some good news. Those that have purchased solar get some significant tax credits and incentives.

Commercial Solar Incentives

Acquiring solar for your business comes with some commercial-specific solar incentives. Awareness of these financial enticements is the first step toward taking advantage of them.

Federal Solar Tax Credit

Federal tax credits cover a large chunk of solar costs. The Energy Investment Tax Credit (ITC) is for all solar array sizes. These tax credits roll over from year-to-year, allowing them to apply to taxes you would have owed.

As of 2021, the ITC gives 26 percent of the solar array back to the owner. Thankfully, this solar credit got extended in December of 2020. 

Now it will stay at 26 percent until 2022, then 22 percent in 2023. After this point, only commercial installations can take advantage of this tax credit. However, it will only cover 10 percent, which is why many companies are installing solar now.

Solar Depreciation: Modified Accelerated Cost Recovery System (MACRS)

One of the best cost recovery programs for businesses is MACRS. This program calculates how much the solar array would depreciate. You can then get this money back over five years.

If you get the ITC, you will have to reduce the depreciation amount by half the tax credit you received. Some systems can qualify for 100 percent bonus depreciation. Businesses that use depreciation to their advantage can save even more.

State Tax Credits

Some incentives depend on the state you live in. You will need to check your state’s solar policy and incentives to know for sure what’s available.

Talking to a solar company in your area is another way to determine your state-specific options. Go Solar Group currently installs solar in Utah, Albuquerque, New Mexico, and Sparks, Nevada.

Residential Solar Incentives

Incentives currently in place make residential solar a good investment. 

Federal Solar Tax Credit

Like commercial solar, residential solar can also get 26 percent off the price with the ITC. Residential installations, however, will not receive any federal tax credits after 2023.

To get this credit, you need to fill out the 5695 form for the year installed. This document will help you file the tax credit accurately. New forms normally get released in February of the following year.

Make sure you keep your 5695 form and your TC40 state and federal award letters. If audited, these will verify you filed correctly.

State Tax Credits

Each state is different. Like commercial solar, state incentives for residential solar incentives are available at DESIRE.

Although solar companies will help you find incentives for your area, getting them is ultimately up to you. Make sure you don’t forget to file for your solar incentives.


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