In the Chico area, residents often hear about the Grinch who stole Christmas, but what they may not know is the culprit behind the disappearance of tax credits for insulation, windows, doors, skylights, and roofs.
The identity of this elusive Grinch remains unknown, although it likely has ties to a federal agency. Despite this setback, there’s still a silver lining: 2017 tax credits are available for certain solar projects.
While it’s disappointing to lose out on some tax benefits, any opportunity to save money is worth considering. Let’s delve into how the IRS-U.S. Department of Energy program operates.
Solar Tax Credit Overview: Solar energy systems are now the sole beneficiaries of federal energy tax credits among various home improvement options.
Referred to as the “residential energy efficient property credit,” the solar tax credit:
- Applies to 30 percent of the expenses associated with solar hot water heaters and solar panels.
- Covers installation costs, which were previously excluded from energy-efficient tax credits.
- Has no monetary cap.
- Is applicable to homes across the United States, regardless of whether they are primary residences.
- Is available for existing homes as well as those under construction.
How to Claim Your Credit: To claim your credit, you’ll need to submit IRS form 5695 with your 2017 taxes, along with the manufacturer’s certification statement and receipts.
Although the solar tax credit is substantial at 30 percent, it’s gradually diminishing over the coming years. It will remain at 30 percent until December 31, 2019, before decreasing to 26 percent in 2020 and further to 22 percent in 2021.
Solar Water Heater Tax Credit: Solar water heaters, which utilize solar energy to heat water, are eligible for tax credits under specific conditions:
- At least half of the energy produced by the system must come from the sun.
- The system must be certified by recognized entities such as the Solar Rating and Certification Corporation (SRCC).
- Tax credits are not available for expenses related to swimming pools or hot tubs; heated water must be used in the home.
Solar Panel Tax Credit: Photovoltaic systems, commonly known as solar panels, can also qualify for tax credits if they meet certain criteria:
- The panels must generate electricity for a home.
- They must comply with applicable fire and electrical code requirements.
Earlier Tax Credits on Home Improvements: Previously, tax credits were available for home improvements such as insulation materials, Energy Star-rated exterior doors and windows, and pigmented metal roofs. However, these credits expired at the end of 2016.