It is expected that the value of the credit will remain 26% for two more and may drop to 22% in 2023 and sunset altogether in 2024. For businesses, the credit follows the same criteria and track. However, the credit falls to 10% in 2024 and will stay the same in the future.
Tax advisors and accountants have understood well and long recognized the value of this credit for their eligible clients. Also, homeowners and businesses who own commercial buildings, event arenas, and grounds can leverage it to drop down the gross cost of their solar panel installations.
Here we have rounded up four essential things that you must know when advising your clients:
Solar Tax Credit Reduces the Cost
Homeowners that meet specific criteria can save money on their solar system. Eligible homeowners can use the credit if they owe taxes in the year in which their solar system is installed. Moreover, the federal solar tax credit reduces the gross cost of the solar system by up to 26%, the current amount of the credit. For every $10,000 of solar that you buy, you could receive a credit for up to $2,600 on your federal taxes
The solar tax credit allows the rollover factor.
The solar energy tax credit has a rollover option. For example, if a homeowner doesn’t utilize the total 26% tax credit in the same year he placed the solar system into working, the residual amount can be carried over into future tax years.
In more simple words, if the maximum credit you receive is $6,000, and now you have only $4,000 of tax liability in the year you got the working solar system, you may be able to carry over the remaining $2,000 in the coming years.
Install Solar Panels before Sunset Date
The 26 percent credit will probably reduce to 22% in 2023 and sunsets after that for homeowners. Besides that, solar projects take several days or months to get the installations approved. Therefore, those waiting to sign up for solar panels in December 2023 may drop the opportunity to claim any credit.
Be Watchful of additional tax credits.
Certain municipalities and utilities offer cash rebates or other incentives, and some states give additional tax credits for homeowners who get solar panels at their rooftops.