4 Misconceptions About Solar Panel Tax Credits

How Much Tax Money Can You Earn from Your Solar Panels?

You may have seen the Tik-Tok videos describing how you can earn money on your taxes if you install solar panels. And now that it is tax season, you want to earn all that money from the Federal Government’s green energy investment incentives.

But what do these tax credits actually offer?

You can read more in detail about the solar tax credits at Energy.Gov. For this article, we are going to look at several frequent misconceptions about these tax credits.

Misconception #1: You can earn more from solar tax credits than you pay in taxes, making a net positive income for installing solar panels.

Truth: These tax credits are non-refundable which reduces the amount you owe and doesn’t give you an income above and beyond what you paid. In this way it is different from the Earned Income Tax Credit and the Child Tax Credit, where you earn the credit even if you have no tax liability.

Misconception #2: I have to own my home to qualify.

Truth: You have to have some ownership in the solar power system, not necessarily in your house. The Department of Energy article mentions members of cooperative housing or condominiums who can be eligible for their costs associated with community solar. If you have costs associated with a solar installation, come talk to one of our tax preparers to see if your costs will qualify.

Misconception #3: I can add tax credits and rebates to equal 100% of my solar costs.

Truth: Any utility rebates must be subtracted from your total costs before you claim your federal tax credit. However, state tax credits will not be deducted from your federal tax credit but they will increase your claimed income.

Misconception #4: Credits and payments from local utilities will cover the cost of financing.

Truth: If something sounds too good to be true, it is. When someone sells you financing on solar panels saying that they will pay for themselves, you need to talk to an accountant or tax professional who has a fiduciary commitment to you as their customer not to the solar panel manufacturer. There are always costs: do those costs make sense for your situation? Don’t expect a salesperson whose next meal depends on you purchasing to correctly analyze your situation.

Can I Claim Solar Panel Costs From Last Year or a Previous Year?

Each person’s financial situation is unique, and if you are thinking about claiming solar or other green energy costs you should make an appointment to speak with Danielle or Melynda about your unique situation.