Solar energy systems have multiple benefits including the conservation of environmental resources and extensive savings on your energy bill. New solar customers can save even further by taking advantage of the US federal solar tax credit and the Maryland solar tax credit.
Understanding the Federal Solar Tax Credit
A federal solar tax credit is a cost reduction incentive by the US government that is offered to solar power energy customers. The credit allows customers to deduct a percentage of the total cost of their solar system when filing their federal income taxes. In 2021, this allowed customers to deduct 26% of the total solar installation cost on their federal taxes. Based on the current market price of home solar panels, homeowners generally get tax credits ranging between $4,000 and $6,000, but this amount can vary based on factors such as the size of your new solar system.
How Long is the Federal Tax Credit Available?
In December 2020, the US government passed a bill to extend the Investment Federal Credit (ITC) that entails a 26% tax credit for solar systems installed between 2020 and 2022 and a 22% tax credit for systems installed in 2023. Unless Congress renews the contract, the tax credit rates are expected to last through the start of 2024. The good news is that President Biden’s administration plans to file a bill seeking to extend the existing solar tax credit rates for an additional 10 years.
How to Claim The Federal Solar Tax Credit
You need to fill Form 5696 when filing your income taxes to claim the residential ITC. The form has easy-to-understand instructions that guide homeowners through the tax filing process. If you need assistance with filing for your tax credit, Old Line Solar can help.
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