How do solar tax incentives work? Since the investment tax credit (ITC) went into effect in 2005, homeowners have been able to claim part of the expense involved with obtaining a solar system on their federal tax return. This spurred huge growth as homeowners began to install solar panels in Ohio and across the nation.
In 2022, the timeframe for this advantage was extended and the amount was increased thanks to the Inflation Reduction Act–from 26% to 30% of the cost of equipment, permitting, and installation can now be claimed on federal tax returns. The ITC applies to both residential and commercial systems, and there is no cap on its value. This generous 30% tax credit will now be available through the end of the 2032 year for homeowners, and through the end of 2025 for businesses.
In 2033 and 2034 the credit percentage for homeowners will be reduced to 26% and 22% respectively and will ultimately be eliminated in 2035. This extended credit will also apply to certain battery storage systems. As with any tax credit, it does not lower the overall price of solar panel installation in Ohio, but it will lower the amount you owe in federal income taxes. So for example, if you’ve earned a credit of $5,000 on your project and you owe $7,000 in federal taxes, that amount will be lowered to $2,000. If you don’t typically owe much in federal taxes, then any excess credit can be carried over into future tax years. For more specific questions on the incentive, check out the U.S. Department of Energy's handy homeowner guidelines.
Homeowners and business owners have a lot to gain from this latest update to the investment tax credit–take advantage of this opportunity and contact us today to learn more or receive a free quote!