The federal government provides dozens of tax credit and rebate programs to help you save money while also choosing to save Earth.
Energy efficiency solutions are the talk of the town. They might involve not wasting water while brushing your teeth, or turning the lights off when you leave your house. But one of the most impactful decisions you can make is to install solar panels on your home.
Taking initiative, especially in some of the heftier energy-efficient options such as solar, can cost you a lot financially. Knowing what rebate programs and tax credits are available for people making the switch to energy efficiency will save you thousands of dollars.
But you have to know what’s available and if you qualify first.
We have compiled a list of the energy-efficiency-related tax credits and rebate programs created by the Federal government.
Solar Tax Credit
Installing solar panels may be intimidating because the price tag can be high. However, on average, most people are able to make their money back in 10 years after switching. In states where energy bills are more expensive, such as Hawaii or California, homeowners can make all of their money back in 5-7 years!
Even still, many don’t want to make that switch with the promise of financial aid–which makes sense. Everyone is looking for the best deal, the way to save the most money.
The U.S. federal government has been dedicated to helping homeowners and business owners to achieve cleaner energy production for years. They understand that many investments in cleaner energy provide enormous returns. In 2018, they created the Bipartisan Budget Act–otherwise known as the Solar Investment Tax Credit (ITC).
The ITC makes it easier to purchase fuel cells, small wind turbines, geothermal heat, and solar energy systems for your home or business. The ITC helps homeowners have the money for the initial investment.
There are a few requirements in order to qualify for the Solar Investment Tax Credit. The installation:
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Must provide electricity for residence
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Meet Applicable Fire and Electrical Code Requirements
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Doesn’t have to be taxpayers principal residence
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Can be on principal and secondary homes
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Rentals don’t qualify
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The ITC expires at the end of 2021. As each year passes, the federal government covers less of the expense of installations.
As of right now, any system installed and placed in service by January 1, 2020, the ITC can cover up to 30% of costs.
After December 31, 2019 and before January 1, 2023, 26% can be received back as tax credit.
And between December 31, 2022 and January 1, 2024, 22% will be subsidized.
After 2021, the ITC will only cover 10% of costs for businesses to install alternative energy equipment.
While many say that solar panels get cheaper with every year so it is best to wait until the prices have fallen substantially, the opposite is true. The federal tax credit also falls with every year and may eventually become nonexistent. And the amount the tax credit saves you now is likely more than you will save by waiting for the installation’s price to fall.
Since the federal subsidies are decreasing with time, the best time to get solar panels is now. (Only if you want to save money, of course.)
Solar Water Heater Tax Credit
In addition to solar panels, the ITC covers solar water heater costs–with some stipulations. The solar water heater can’t be used to heat exclusively swimming pools or hot tubs; at least half of its energy must be solar; it must provide electricity for the residence; it needs to meet fire and electrical code requirements; and must be certified by the SRCC.
If you meet these requirements, apply for the Solar Investment Credit to get up to 30% of the installation cost covered.
HVAC, Windows, Doors, Roofs, & Insulation Tax Credit
Switching energy sources isn’t the only way to be energy efficient. The federal government recognizes this by also providing subsidies for replacements of HVAC systems, windows, doors, roofs, and insulation.
Some of these tax credits have recently expired, but there is still a way to claim what would have been covered.
If you already have filed for the tax year where you made the purchase, you can amend your tax return in hopes that you’ll make even a little bit back. If not, be sure to include the purchase in your return.
The IRS’s 2021 plan also includes a new incentive for updating these systems, offering up to $500 of residential energy property credit–depending on the system. Five hundred dollars is pretty significant–but it’s possible that in the future, the federal government will draw up another, even more profitable legislation to help energy-conscious homeowners.
Take advantage of these federal tax credit and rebate programs for energy efficiency programs while they last–they might improve throughout the years, but they could just as easily become worth less money to you.
References
https://www.irs.gov/newsroom/energy-incentives-for-individuals-residential-property-updated-questions-and-answers