How Will the Solar Tax Credit Save You Money?
The credit lowers your federal taxes. So if you spend $24,000 on a system, you can subtract 30 percent of that, or $7,200, from your federal taxes. (You must take the credit for the year the installation is completed.) If, say, you would owe $7,000 in taxes before the credit, a $7,200 credit would drop what you owe to zero. You can’t get a tax refund for the $200 remainder, however. GOOD PART: YOU CAN CARRY THAT INTO THE NEXT TAX YEAR.
How Long Does the Solar Tax Credit Last?
The 30 percent credit lasts until Dec. 31, 2032. It drops to 26 percent in 2033, then 22 percent in 2034, and disappears in 2035, unless Congress continues it. (The new law supersedes an older law, set to expire in 2024, that would have provided a 26 percent credit for solar installations this year, and 22 percent in 2023.)
Do You Still Get A Federal Tax Credit?
The new law doesn’t reduce your federal credit if your state also offers one. But it will be up to your state’s taxing authority whether your state credit is reduced if you take advantage of the federal one.
New York, for example, does not cut its solar incentives for people who take advantage of federal ones; state residents can credit 25 percent of qualified solar energy system equipment expenditures from their state taxes, up to $5,000. You don’t get a refund if that amount is more than what you’d owe, but you can carry over the difference for up to five years.
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