If you’ve been thinking about solar, you may have heard about the federal tax credit—the largest incentive currently on the market. While the tax credit is a great resource for those looking at reducing their solar installation costs, there are some important things to know to make sure you can make the most of the credit. 

Solar Tax Credit Benefits For Buying New Solar Panels In Colorado in 2020

These frequently asked questions will help you make your decision about solar.

Is the solar tax credit still good in 2020?

 Yes. However, the solar tax credit will start to step down out over the few years. 

If you begin construction on a solar system before December 31, 2019, you will receive a tax credit for 30% of the price of the solar system when you file your 2019 taxes. 

In 2020, the tax credit is 26% and will continue to decrease and, unless Congress acts to renew it again, it will completely disappear in 2022.

Solar Tax Credit for 2020

 

Tax credit Start construction by: Homeowners Commercial
30% Dec 31, 2019
26% Dec 31, 2020
22% Dec 31, 2021
10% Dec 31, 2022 (commercial only)

 

 

Is the tax credit basically a 30% (or 26%) coupon for my solar system?

 No. You pay full price for your solar panels at the time of installation, either in cash or through available financing. The 30% (or 26%) price break will come to you in the form of a tax credit when you file.

That means even if you purchase the system in December, you will not get the credit until the first few months of 2020, depending on when you file your taxes and how long it takes to get your return.

 

Everyone who goes solar by the end of 2019 will get the 30% credit, right?

 Unfortunately, no. Since this is a tax credit instead of a tax refund, you must first owe taxes to claim the benefit. 

In other words, if your system costs $10,000, you could claim $3000 for the credit. If you owed $5,000 in taxes, your cost would be reduced by $3,000, leaving only $2,000 for you to pay. However, if you only owed $2,000 in taxes, your taxes would be reduced to $0, but you would not get a refund check for the remaining $1,000.

Solar Tax Credit for Solar Panels

 

While in the past the credit could be rolled over for up to five years, after the credit expires in 2022, it is unclear if that will continue to be the case. To be safe, you should prepare for the credit to not roll over after 2022.

 Does the credit apply to rental or vacation properties?

 It depends. The tax credit is meant to apply to the home that you reside in. So if you have a rental property or vacation home, you could only claim the credit for the amount of time of the year that you personally resided in that property.

 For instance, if you lived in a vacation home for half of the year, you could claim 50% of the tax credit. If you lived there 3 months of the year, you could claim 25% of the credit, and so on.

 Your best bet is to install solar on the home you live in year-round,

 

Can I claim the credit if I lease my solar panels?

 No. You can only claim the credit if you own the solar materials. If you lease the panels, the company you are leasing the panels from actually paid for the materials and installation, so they would be able to claim the credit and you would not.

 This is why we recommend purchasing the system yourself. As long as you are the owners of the panels, you can claim the credit no matter how you paid for it (cash or financing).

 

Does it still make sense to go solar even if I can’t claim the full tax credit?

 Yes! The tax credit will still continue for the next two years, even if it is slightly reduced. There are also other solar incentives in Colorado that you could qualify for. 

In fact, solar is cheaper than it’s ever been before! Panel prices have dropped 23% in the last five years. But, as energy prices rise, panel prices will too. It’s best to get in now, while the price of panels are low and the tax incentive is still high.

Cost for solar panel usage

What’s more, solar power will release you rising electricity rates. National rates have risen 15% in the last 10 years, with Colorado’s rates rising even faster.  In fact, according to KOAA, energy rates in Southern Colorado are now nearly 17% higher than Denver’s. Check out this blog post for more information.

 

Who is the best residential solar company near me?

If you live in Southern Colorado, we here at Steel City Solar invite you to connect with us. As the region’s top solar installer, we would love to meet you and help you make the most of the federal tax credit.

 We’re proud to be the top residential solar company in Southern and Eastern Colorado. Together, we can help you run the numbers to see how going solar would help you save money long term by cutting your strings to the rising costs of accessing electricity from the grid. Installing residential solar panels will help you take charge of your family’s energy production.

 Call us today to set up a free, in-home consultation with one of our representatives to see how going solar can benefit you and your family.