FAQ: What’s the situation with the Federal tax credit for solar?

The “Residential Renewable Energy Tax Credit” is a Federal income tax credit available worth 30% of the total cost of the solar array. This is available for solar installed for primary and secondary residences. For a Solaflect PV Tracker, this is worth nearly $6,000. The tax credit is available for solar installations that are in place and operating by the end of 2016. UPDATE: in December 2015, Congress extended the tax credit. It will be 30% through the end of 2019. After that the credit steps down over a few years. In the final year, 2021, the credit will be 22%.

Tax credits are different from tax deductions. To use a tax credit, you first calculate how much tax you owe for the year. Then, instead of paying that amount of tax, you apply the tax credit as “payment” instead. That means that the tax credit has full face value, unlike deductions.

If you have already paid taxes over the year through withholding, then applying the tax credit can translate into a larger refund. However, the solar tax credit is non-refundable. That means that if you owe less in Federal income taxes for the year than the size of the credit, you will not receive the difference as a refund. Instead, you can carry forward any unused portion of the tax credit to the next year’s taxes.

To claim the tax credit, use IRS form 5695. The Department of Energy also has information on the tax credit.

Please note that Solaflect cannot and does not give tax advice. To properly determine your use of any tax credit, you should consult with a tax professional who can review the specifics of your situation.

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