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Solar Panel Tax Credit: Homeowners Can Cut Their Installation Costs And Electric Costs

Solar Panel Tax Credit
Solar Panel Tax Credit; Source- CNET

Federal tax credits might help down the cost of placing rooftop solar panels over the next ten years as Americans increasingly turn to them to cut their energy costs. However, the Inflation Reduction Act, introduced last year, enlarged and prolonged them in support of the federal government’s effort to minimize greenhouse gases that are responsible for climate change. Tax benefits for solar panels are not new, although the Inflation Reduction Act is not new.

Solar Panel Tax Credit

Solar Panel Tax Credit; Source- The US Sun

Eligibility For Tax Credits

You qualify for a tax credit from the government worth 30% of the cost of a solar energy system if you buy and install one at your house by the end of 2032. This cost includes the panels, associated equipment, wiring, setup, authorizations, and fees. In 2033 and 2034, the credit declined to 26% and 24%, respectively. Solar energy is converted into electrical energy by solar panels. As per statistics provided by the Solar Energy Industries Association, home installations exceeded 702,000 last year, more than double the number for 2018. By 2030, the association predicts that solar panel systems will be installed in 15% of American homes.

Solar Tax Credits Reduces Tax Bills

You won’t receive any of the solar tax credits as a refund if you don’t owe federal tax; instead, it will lower the cost of taxes dollar for dollar. The American Institute of Certified Public Accountants’ April Walker, lead manager of tax policy and ethics, explained that you can roll over any unused credits to subsequent tax years. Nine kilowatts is the standard size for a household solar installation. According to price data provided by the National Renewable Energy Laboratory, the cost of installing such a system would be around $27,000, and a credit would enable you to recover $8,100 of that cost.

Solar Tax Credit Has No Upper Limit

Although bigger structures can be significantly more expensive, the credit has no upper limit. The average homeowner recovers the total expense of the system in around eight years thanks to lower electric bills, tax rebates, and incentives. The amount of electricity you consume, the number of solar panels you have, the direction of your property (south-facing roofs receive the most sun in the Northern Hemisphere), and how dark your lot is are all variables that will affect your real savings.

State-specific tax incentives are available in some cases, and utilities may provide rebates for solar installation. For assistance assessing your potential benefit, speak with a tax professional. In some circumstances, rebates may influence the value of the federal credit. Since it can be costly to eliminate and rebuild the solar panels, it can make more sense to invest in a new roof if you need one before you purchase solar energy. You might be able to save money by having both jobs done at the same time because some solar installers also work on roofs or collaborate closely with roofing businesses.

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