You may be wondering why there’s any hurry to install a power system that’s going to last for decades. One year more or less won’t make much difference, right? Well… functionally, no. But if you want to collect the maximum possible tax credit for your solar PV installation, you’ll want to get your system up and running this year (2019)!
The Bipartisan Budget Act of 2018
Signed in February 2018, this act reinstated the tax credit for fuel cells, small wind, and geothermal heat pumps. The tax credit for all technologies now features a gradual step down in the credit value.
A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. In most instances, the residence does NOT have to be the taxpayer’s principal residence (see below). Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.
Solar-electric Credit Timetable:
- 30% credit for systems placed in service by 12/31/2019
- Complete tax credit calculations on IRS form 5695.
- 26% for systems placed in service after 12/31/2019 and before 01/01/2021
- 22% for systems placed in service after 12/31/2020 and before 01/01/2022
- 10% for systems placed in service after 12/31/2020 and before 01/01/2022
- There is no maximum dollar amount of credit available for systems placed in service after 2008.
- Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
- The home served by the system does not have to be the taxpayer’s principal residence.
- The credit can be carried forward and applied through 2022