Requirements to receive up to 30% for the tax credit for solar panels in 2023
The value of the IRS’ solar panel tax credit has increased. What is it and who is eligible?
In order to increase the uptake of renewable energy, the United States will offer a reimbursement of up to thirty percent for households that install solar panels in the form of a tax credit. The value of the Federal Residential Solar Energy Credit was raised through the passage of the Inflation Reduction Act from up to twenty-six percent, as had been offered in 2020 and 2021.
When considering eligibility, different details must be taken into account, and those will be discussed here.
The Tax Credit for Solar Panels, an incentive
The tax credit, which can be claimed when one files their income tax return, discounts the cost of installing a solar panel by the taxpayer.
According to the IRS, the tax credit can be claimed by those who added solar panels to their “house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.” However, the home for which the credit is being claimed must be the taxpayer’s “main” residence.
The credit can be claimed once the taxpayer has paid for the solar panels and had them installed, which will generate a total cost that will be reported to the IRS. Critically, the credit must be claimed for the tax year the installation was made. So if you have solar panels installed in 2023, you will need to report that information on the tax return you submit to the IRS next year.
Those looking to claim the credit must fill out IRS Form 5695.
What about previous years?
You still will be able to claim the credit for solar installations that were purchased in previous years, but the total value drops to twenty-six percent. Some remuneration will be granted to those who installed panels from 2017-2022 when the credit either did not exist or was worth less than it is today.
Expenses, another point to take into account
Since the total value of the credit is based on a percent of the expenditure on the panels, the IRS will examine the following costs:
- Solar panels or cells.
- Contractor labor costs incurred for preparation, assembly, or installation
- The balance of the equipment system.
- Energy storage devices with a capacity of three kilowatts per hour or greater (in the case of those installed after December 31, 2022).
- Sales taxes on eligible expenses.