I’ve been researching solar panel installation; in particular a Tesla solar roof.
One of the biggest misconceptions about solar installs is the federal tax credit. It’s often mentioned that this credit is 30%. It’s actually 26%. That’s a big difference when you’re talking about a $20,000 - $60,000 cost. That’s $800-$2400 less than you may be expecting.
Before I continue, I want to make sure that anyone reading this realizes that I’m not a tax advisor.
The typical solar panel install nets about $7000 in potential tax credits.
If you get a refund, YOU CAN NOT TAKE A TAX CREDIT. If your standard deduction is higher than the “form 5695 residential energy tax credit”, you can’t take it. Tax credits only work to reduce your tax liability (what you owe).
If you OWE money to the IRS, say $3500. You can bust a $7000 credit up over 2 years by carrying credits to the next year. In other words. $3500 on your 2020 taxes and $3500 on your 2021 taxes.
Realize, that if you have a typical home mortgage and make less than $75,000 a year, and are married filing jointly, it is likely your standard deduction of $24,200 exceeds most case scenarios unless you have a home business with more than $18,000 in OTHER QUALIFYING tax deductions.
Also realize that NO DEDUCTIONS even if you qualify in combination with your liability or deductions come if you lease your panels. Yes, a lot of companies like SunRun and Vivint lease panels. Many of these companies will claim to give you a rebate after the install of $2500 or so. They are giving you a part of the 26% tax credit THEY are going to receive for your install.
From every unbiased source I’ve seen and the hundreds of customer reviews I’ve read, it’s not a good idea to lease your panels - even considering that this method is one way of “getting some cash back”.
Leading solar panels dramatically reduces the value of your house, and it’s highly likely that your next home buyer won’t want to take over your contract. Know that if you terminate a solar panel contract - you owe 100% of the solar install immediately. While most “solar lease companies” claim they won’t put a lien against your home but they will do what’s known as a UCC (Uniform Commercial Code) filing. No title company will approve the sale of your home until you’ve cleared up a solar financing/lease bill.
↑ losses from clearing UCC claim CANNOT be recovered through taxes. Meaning, you can’t claim a loss on your taxes or any associated attorney fees with a UCC claim even if you had attorney fees as part of your other business deductions.
I hope this made a little more sense if you were confused about this as I have been. If you have any questions, leave a comment and I’ll try to help.