FEDERAL AND STATE SOLAR TAX CREDITS ARE STILL ON THE BOOKS, AND OFFER POTENTIALLY BIG SAVINGS
By Walter Daszkowski, CPA, PFS
The U.S. has been gradually embracing the idea of making renewable energy (wind, geothermal, hydro, and solar) a pivotal source of power for homes and businesses, and solar (aka, photovoltaic) electricity is one of the most popular options on the market. As an incentive to ensure that as many homes and businesses as possible adopt its use, the federal government passed the Energy Policy Act (EPA) of 2005, which introduced a solar tax credit. Due to its resulting popularity, Congress has been extending its expiration date for over a decade now meaning the Federal solar tax credit (a deduction of the cost of buying and installing solar energy systems from federal taxes) is still available to both home and business owners. Here are some of its important details:
For 2019, the credit remains at 30%. For the filing year 2020, both homeowners and commercial enterprises benefit from a 26% credit; in 2021, the credit reduces to 22%. In 2022 and onward, only those installing new commercial (not residential) systems will benefit from a 10% credit.
There are also state credits. If you are a New York State resident and the solar system is installed on your residence, you can get up to a 25% state tax credit. New Jersey’s credit varies depending on the market value of the system. Your CPA will be able to assist you with that.
To qualify, you must meet a few requirements during the corresponding tax year: For this year’s filers, a solar system had to have been installed by Dec. 31, 2019, and you must have owned (not rented) the home or business so outfitted. You must also own the solar panels (leasing disqualifies you).
On that last point: it’s understandable that you might want to lease your panels to save money. The problem is that, in such a case, the leasing company is actually the party that qualifies for the tax credit. You can, however, buy panels by taking out a loan and enjoy the credit.
Thanks to this tax code provision, you can start saving money from day one. It has made this limitless renewable energy source more available and affordable for home and business owners, and photovoltaic power can save on electricity bills, too.
Be sure to save then give to your CPA all of the installation documentation to ensure you are receiving the maximum credit.
Walter Daszkowski, CPA, PFS
Daszkowski, Tompkins, Weg & Carbonella CPA, P.C.
1303 Clove Road, Staten Island
T: 718.981.9600 Option 1 / F: 718.981.9601
278 Route 34, Suite 1 & 2, Matawan, NJ wdcpa.com