The goal of solar electric systems is to save on costs. You utilize the power of the sun and turn its rays into electricity to power your home. Not only do you save in the long-run, but you can also save on taxes. A special tax credit is issued to those who install these solar systems. There is also a way to get a refund from solar credits even if you don’t have solar power.
Learning About the Solar Tax Credit
Before discovering ways to apply for the solar tax credit, you should first learn how it actually works. You do not get a credit for the entire amount you pay for the system. Instead, the government applies a percentage of the total cost as a credit. If you pay $10,000 to have your solar system installed, the government will issue a $2,600 credit for you going solar. It is known as the Residential Renewable Energy Tax Credit, which is currently 26% and will expire at the end of 2021.
Rental Properties
You can put a solar system on a house you own and later rent it out to others. While normal rental properties do not qualify for the solar credits, they count when the owner lives in them for at least a portion of the year. You can stay in the home for a few months, such as during the summer, and then rent it out the remainder of the year. You can then claim 25% of the total credit you would normally earn for having the system installed. This means you would get 25% of the 30% credit from the total you spent. If you spent $10,000 on your system and would normally get $3,000 of a credit, you now get a $750 credit on your taxes for living in a solar home for three months.
Small Wind Electric Systems
The Residential Renewable Energy Tax Credit does not only apply to solar systems. You can purchase a small wind electric system and still gain this incentive. A fully certified wind turbine gets you the same 30% credit as a solar system. If you have one of the 13 qualifying models, you can apply for this credit on your taxes. It must qualify, though, and follow the safety guidelines set-forth by the government.
Taxes can be a pain to deal with, but there are credit options out there to help you make the most of your refund. Use the solar credit to your advantage whether you have a rental property you stay in for a short time or a wind system instead, and get a large amount credited to your taxes to ease your burden.
~Here’s to Your Financial Health!
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