How to lower my tax bracket? This is on everyone’s mind these days!
You could qualify for a solar tax credit worth thousands that will help offset your investment into a Erus Energy solar energy system. This in combination with the flow of energy from your system can make solar energy make a lot of cents! It is also a simple answer to, “how to lower my tax bracket!”
What is the Solar Investment Tax Credit?
The Solar Investment Tax Credit (ITC) is a 30 percent federal tax credit for solar systems purchased and installed on residential and commercial properties. For residential installations, the ITC would be applied to the homeowner’s income taxes. The credit is available once the solar system is turned on and fully functional on the homeowner’s house. Take note that there is a difference between a rebate and a credit.
How Does the Solar ITC Work?
As a tax credit, the homeowner will take the amount directly off the amount of tax money owed, rather than as a deduction from their taxable income. Simply speaking, a tax credit is a dollar for dollar reduction in the income taxes that the person or company would otherwise have to pay the government. The amount of the ITC is dependent on the total cost of the purchased solar for that individual’s property. Both residential and commercial ITC is equal to 30% of the net cost of the solar installation. The individual can claim the credit for their primary residence, a vacation home, and for either an existing structure or a new construction.
Here is an example of how the solar tax credit works:
Joe just had a $40,000 solar system installed on his house. After filing his taxes that same year, Joe finds out that he has a total tax liability of $13,000. Note that your liability is not necessarily what you owe at the end of the year. Your liability is the total amount you have paid over the course of the year plus any amounts still due at the end of the year.
From the total liability of $13,000 owed, after taking advantage of the 30% tax credit how much would Joe still owe the IRS?
Gross Cost $40,000
ITC Total (30%) $12,000
Net Cost: $28,000
Joe then files his taxes and uses his ITC towards the total amount of money owed. Amount of taxes owed $13,000 ITC Total (30%) – $12,000. Joe now owes the IRS a total of $1000. He essentially took the same money he was going to give the government and redirected it into a solar energy system that will produce clean energy for years to come. Pretty smart!
Filing Requirements for Solar Tax Credits
To claim the credit, the homeowner must file IRS Form 5695 as part of their tax return. The credit needs to be calculated on the form, and then entered on their 1040.
If the total amount of the ITC outweighs the total of the income taxes due, there will not be any return to the homeowner by the IRS rather the excess amount will be carried forward to the next year. To find out if you qualify for the ITC get a free quote or call us at 1-844-2-SAVE-ENERGY.