Solar panel technology isn’t new any longer. In fact, it’s gotten quite advanced. When you install solar panels on your roof, you can look forward to greater energy independence and significant savings. However, if you’ve been hoping to take advantage of tax credits to defray the costs of your new solar panels, you’re running out of time. Talk to your CPA promptly to find out how you can maximize your tax savings before the year runs out.
What Happens If You Schedule an Installation in 2019
Here’s the bottom line: The sooner you schedule a solar panel installation, the more you can save through tax credits. You can qualify for a federal tax credit of 30% if you install solar panels on your principal residence and if they are placed in service before December 31, 2019. This means that the panels don’t just need to be installed by then—the system needs to be actively supplying your home with electricity by that deadline.
The average cost of solar panels varies according to how much power the system is capable of supplying. Before tax credits are applied, the average cost of a two-kilowatt solar system is about $5,960. The average cost of a 10-kilowatt system is nearly $30,000. If you decide to invest in the larger system and you qualify for the full 30% federal tax credit, you could knock off $9,000 from your bill. That means your $30,000 solar panel system will only cost you $21,000. Keep in mind that it will continue to reduce or perhaps eliminate your electricity bills for many years to come.
What Happens If You Wait to Install Solar Panels
If you delay installing and putting solar panels into service, you can still qualify for the federal tax credit. Unfortunately, it will be reduced. Here’s a look at what is scheduled to happen with the tax credit:
- Solar panels placed into service in 2020 can qualify for a 26% tax credit.
- Solar panels placed into service in 2021 can qualify for a 22% tax credit.
- Solar panels placed into service in 2022 or later on residential buildings will not qualify for a federal tax credit.
If you’ve been on the fence about whether to invest in solar panels, the ideal time to do it is right now!
How the Tax Credit Affects Businesses
You can claim the federal tax credit for solar panels regardless of whether you’re installing them on a residential or commercial building. However, if you’re installing them on your business’ premises, you’ll get a couple of extra perks. First, you can claim the tax credit in the year that construction on the system began, rather than the year in which the solar panels were put into use. This will give you some leeway in case you wait until the last minute to schedule an installation in 2019. Second, if you do wait until 2022 or later, you can still save a little. You’ll be eligible to deduct 10% of the cost of the system on your business’ tax returns, although the tax credit will have expired.
At The Royce CPA Firm, we specialize in tax and wealth strategies for entrepreneurs. We believe in empowerment through education and knowledge transfer. Call us in Tucson at (520) 321-4626 or use our online form to schedule an appointment.