The government of the United States encourages its citizens to utilize solar power energy to reduce climate change brought about by the excessive emission of greenhouse gases into the atmosphere. This has resulted in the government offering tax reliefs and tax credits to individuals, firms, industries, and companies using solar-powered machines.
Solar has some excellent benefits for the environment, such as reducing carbon footprint, reducing the rate of pollution, and minimizing the reliance on and over-exploitation of fossil fuels such as coal and gas.
Tax Credits from Solar
Installations, maintenance, and repair of solar-generating and solar-powered machines can sometimes be costly, and that is where the Government comes in to offer tax credits to relieve the burden of these expenses. The tax credits offered will come directly from an individual’s tax payment and not their taxable income.
Installing solar energy-generating equipment in your household qualifies an individual up to 30% of the total installation cost, depending on the period of installation.
- Between 2017 and 2019, it was 30% of the total devices in service.
- Between 2020 and 2021, it was 26% of the total devices in service.
- Between 2022 and 2032, it will be 30% of the total devices in service.
- Between 2033 and 2034, it will be 22% on the devices in service. After that, the tax credit will cease.
The Net Metering Law
The state of Washington has set out a clearly defined law known as the Net metering law. The law allows customers who rely on power companies to utilize solar renewable energy to reduce their dependence on electricity consumption. Customers can utilize devices such as solar panels, solar water heaters, and solar air conditioning in their homes but on the condition that they apply for a net metering permit from their electricity provider. Moreover, credits from net metering expire every March 31, and credits gained from any surplus electricity generation are foregone.
Net metering allows customers to buy electricity from their providers when in need. If not in need, they can connect their solar devices’ electricity to the electricity grid, ensuring total usability and minimum wastage.
To qualify for a solar tax credit, renewable energy efforts must be made and seen to your household, apartment, mobile home, or any home that conforms to the Federal standards and regulations on home construction. Claiming the tax credit requires filing the IRS Form 5695 in the tax return. Calculations are done on part A of the form, and your total is entered in your 1040.
The tax credit offered by the Government applies to specific energy-saving machines and equipment such as solar panels, solar water heaters, solar power storages, and labor expenses incurred while installing the equipment.