5 Tax Reasons for Investing in Solar Panels

October 16 2023

Learn about five tax reasons to consider investing in solar panels from the team at Croak Capital.

There are many reasons to consider putting solar panels on your home or business. Solar panels provide energy without a utility bill and reduce carbon emissions, help pave the way toward a sustainable future, and even allow owners to sell their surplus energy back to the grid.

Investing in solar panels offers tax benefits as well.

Recognizing the value of solar energy, Congress has established tax credits for individuals and businesses that transition—partially or entirely—to solar. These tax credits offer the opportunity for substantial savings that can make “going solar” even more financially beneficial.

What Are the Tax Benefits of Transitioning to Solar Energy?

So, what are the tax benefits of transitioning to solar energy? Here are five tax reasons to consider investing in solar panels:

1. Solar Panel Investors Receive a Federal Income Tax Credit

Under federal law, U.S. taxpayers who install solar panels on their homes and businesses can claim an income tax credit on their federal returns. For solar photovoltaic (PV) systems installed between 2022 and 2032, the residential credit amount is 30 percent of the installation cost. According to the U.S. Department of Energy, this amounts to more than $7,500 for the average solar PV system.

2. There Is No Maximum That Can Be Claimed

With the federal solar panel tax credit, there is no maximum amount that taxpayers can claim. This means that even if your home’s solar system costs well above average, you can still claim the full 30 percent credit (the Federal Solar Tax Credits for Businesses are different). Additionally, while the federal solar panel tax credit is non-refundable, taxpayers can carry over any unused portion of their credit to the following tax year.

3. The Tax Credit is Set to Decrease Over Time

If you’ve been thinking about going solar, now may be the best time to do so—at least from a tax perspective. After 2032, the residential solar tax credit is set to decrease to 26 percent in 2023 and then decrease again to 22 percent in 2024. Currently, the credit is set to expire in 2035.

4. You May Be Able to Use the Credit to Replace Your Roof

Along with getting the benefits of solar, some taxpayers may also be able to use the federal solar tax credit to replace their roofs. As the U.S. Department of Energy explains, “some solar roofing tiles and shingles serve both the functions of solar electric generation and structural support and such items may qualify for the credit.”

5. The Federal Solar Tax Credit Doesn’t Just Apply to Primary Residences

Finally, if you own a vacation home, rental property, or business, you may be able to claim the federal solar tax credit for installing solar panels on each of these assets. The U.S. Department of Energy explains that “[s]olar PV systems do not necessarily have to be installed on your primary residence for you to claim the tax credit.” The Federal Solar Tax Credits for Businesses or Section 48 of the Internal Revenue Code (IRC) may apply for rental properties and businesses.

Do you have questions about tax planning or wealth management? We’re here to help. Call 419-464-7000 or contact us online to learn more.