Whether you’re considering solar or have already gone solar, you don’t want to miss out on the residential solar tax credit from the Federal Government. Essentially the U.S. government wants to give you a HUGE tax benefit for being smart and environmentally responsible.
But we know that claiming tax incentives can be daunting. It doesn’t have to be! We are here to help you take advantage of your federal tax claim.
Watch the video below, then follow the step-by-step guide to include your solar purchase in your tax filing.
IMPORTANT NOTE: YOU ONLY QUALIFY FOR THE FEDERAL SOLAR TAX CREDIT IF YOU’VE PURCHASED YOUR SOLAR PANEL SYSTEM (A SOLAR LEASE DOESN’T QUALIFY).
Gather These Documents to Get Started
- Your 1040 Tax Form
- Residential Energy Credit form 5695
- Your solar purchase receipt you received from your solar company
Step 1 – Fill Out 1040 Form
You will fill out your form 1040 as you normally would, but when you get to line 53, that’s where you’ll enter your solar information.
Step 2 – Form 5695
Use your Form 5695. It’s a worksheet to help you fill in line 53 of your 1040 form. You’ll attach Form 5695 to your 1040 for reference. Most residential solar customers would use the following lines:
Example (taken from the IRS 2017 Form 5695)
Step 3 – Add Total Cost of Solar System
Enter the total cost of your home solar system.
Unless you also installed solar water heating, then you’ll enter “0” on line 2. Then you’ll add lines 1 and 2 for line 5.
On line 6, you’re going to enter the number you get from multiplying the number on line 5 by 30% (EXAMPLE: 27,425 x .30 = 8,227).
Skip this part as directed on the form (“Reserved for future use”).
If you have rollover tax credit from a previous year you will enter that amount on line 12. We don’t, so our Line 12 number is “0”.
Line 13 adds up lines 6 and 12.
For most solar customers line 13 will be the same number as line 6 (30% of your total solar system cost).
The next several lines can feel confusing, but if you follow the instructions for form 5695 and use the worksheet you will find what you need.
Step 4 – Residential Energy Efficient Property Worksheet
To fill out line 14 you need to fill out the “Residential Energy Efficient Property Worksheet” on page 4 of the instructions for Form 5695.
This worksheet will help you discover if you have enough tax liability to claim the entire 30% federal solar credit in 1 year.
If your tax liability is too low to claim the full credit, no sweat.
You can claim the rest next year.
RESIDENTIAL ENERGY EFFICIENT PROPERTY – LINE 14 WORKSHEET
To fill out this worksheet you’re going to want to have your 1040 tax Form handy.
We won’t go into detail here.
All you need to know is that the Line 14 Worksheet will have you flow in how much in taxes you owe and other tax credits you qualify for to determine your tax liability for your solar credit (e.g. Child Tax Credit, Health Coverage Tax Credit, etc.).
Once you have completed the Line 14 worksheet you’ll know how much solar credit you can use this year.
In our example we have a tax liability of $8,000 and we aren’t using any other tax credits:
Back to Line 14 of Form 5695…
Enter the total from your completed line 14 worksheet on Line 14 of Form 5695.
Here you are going enter the smaller number between line 13 and 14.
In our example, 8,000 is the number we will enter on line 15.
Line 16 is the remaining amount of your solar tax credit that you can claim the following year (if you don’t receive the full credit this year).
To get the number for line 16 we calculate the difference between lines 13 and 15.
In our case, that number is $227.
Remember, our total available 30% tax credit is $8,227 but our tax liability totals $8,000 for the year.
This means we can look forward to the rest of our solar tax credit next year.
Step 5 – Finish 1040 Form
You’re almost done!
Go back to your Form 1040.
Now you will enter the amount from line 15 on Form 5695 to line 53 on Form 1040.
On our 1040 form, we will enter 8,000.
Again, if you owe more than your solar tax credit, you will pay the remainder. If you owe less, you keep the extra tax credit to use next year.
NOTE: If it’s not tax season, but want to get an idea on your solar savings, you can check out your form 1040 from last year. If your income and deductions will be about the same as last year, the number in box 63 will be a good estimate for the size of the tax credit you can use each year.
You did it!
Now send off your forms to the IRS and get the solar tax credit you deserve.
Do You Have More Questions?
We’re here to help!
Federal Solar Tax Credit FAQ’s
What if I pay my taxes throughout the year?
If you’re like most Americans, you have taxes withheld as you go through the year of employment. When you’re doing your taxes, don’t worry, the tax credit is applied first so it’s never wasted. You will get the same rebate that you would have received if you didn’t have the credit.
What if the IRS withholds more that the value of my solar tax credit?
If the IRS withheld more than the value of your credit, you get an additional rebate for the value of the tax credit.
What if the IRS withholds less than the value of my tax credit?
If the IRS withheld less than the value of your credit, then you get an additional rebate for the rest of the money that they withheld, and you also get to keep the remaining value of your tax credit to use next year.
You can use that money however you’d like. Most of Blue Raven Solar’s customers put that money back into the loan for their solar system to get a smaller monthly payment.
I’m done with my federal tax form, what about my state form?
It will depend on the state you live in, some states have a solar tax credit and some don’t. If you live in Oregon, South Carolina or Utah, you have a state tax credit in addition to your federal one.
Contact Blue Raven Solar for More Information on Solar Tax Savings
*Disclaimer: Please remember we are a solar company, not a tax company. We aren’t giving tax advice, but simply want to give you a bit of an idea of how your claim might work for your solar incentive. If you’re looking for tax advice, we’d recommend you consult a tax professional before you file.
This article was originally published July 10, 2017. It has been updated for the 2017 tax forms.