Do you qualify for Federal Tax Credit with Solar?
A lot of people are wanting to switch to a loan or cash deal when making the switch to solar. The biggest part of that is the 30% Federal Tax Credit. But do you qualify? That’s a question many homeowners want to know but don’t always know if they can trust a solar consultant. That’s understandable. A lot of solar consultants are uneducated and will say whatever to get a sale. You can always look up the IRS code for this. The Section 25D residential ITC. This post might get a tad confusing with all the rules and numbers. If you get lost or have questions, contact me anytime.
One of the biggest lies they tell? You get a 30% rebate for going solar!
A Rebate and Tax Credit are two completely different things. Just because you buy a solar system for your home does not mean you’ll get 30% back from the government. You have to qualify for it. And to qualify, you need tax liability. Just because you don’t have a tax liability, it does not mean the IRS will just send you a check for 30% of your solar system. People who are always looking for tax write offs know the struggle of finding enough to write off to be even by the end of the year so they don’t owe a fortune in taxes. This is where a tax credit comes in handy.
Let’s say at the end of the year you will owe the government $9,000. That means the IRS will come after you for $9,000 if you don’t pay them their money. Here’s were the Tax Credit becomes amazing. Add to the scenario that this year you bought a $30,000 solar system from CalState Solar ( thanks for your business =] ). Of that $30,000, you get a 30% ITC (Investment Tax Credit). That just so happens to be the exact same amount you currently owe the IRS of $9,000. Now remember, this is just an example scenario. You might owe more or less than $9,000 and your system size might be more or less than $30,000. So if your system is only $15,000, don’t get mad at me because you didn’t get $9,000 back in ITC. You receive an ITC of 30% of your gross system cost.
So now that that is taken care of, what now? Since you now have an ITC of $9,000, and you owe the IRS $9,000m you now owe them nothing. You can keep that money you were going to pay the IRS. Most people decide to take that money and pay off some of their solar loan. Some decide to keep it. That decision is 100% up to you. Rule of thumb with ITC, if you owe money at the end of the year, it’s likely you qualify. If you get a tax refund at the end of the year, less likely you will qualify. This is obviously a case-to-case situation so make sure you find out your individual situation before deciding.
So let’s recap. You always, always, always! need to talk to your CPA. Unless of course you are one, then talk to yourself alone so it’s not awkward around others. If you’re not sure whether or not you qualify, always consult with a tax professional and never a solar professional. Or your brother-in-law that knows everything. They are professionals for a reason, use them! As I emphasize in all my posts, please do research before locking yourself into something you can’t get out of.
So many homeowners have been misled by solar consultants that they will receive a huge check at the end of the year for going solar. That is just simply not true. Sorry. And you might think that only small companies are out to get you. No. I worked with SolarCity. I know how they operate their sales teams. I am still hearing stories about how mad customers are that they signed up for a loan program but didn’t qualify for the ITC like the solar consultant promised.
Do your research. Be educated. Get the best deal for you.