Is the Solar Tax Credit Disappearing? What You Need to Know

If you’ve been considering solar installation in Sonoma County, you’ve likely heard about the federal solar tax credit. This incentive, known as the Investment Tax Credit (ITC), allows homeowners to deduct 30% of the cost of their solar system from their federal taxes. However, there’s been concern about whether this tax credit will disappear or change.

The good news? The solar tax credit isn’t going away anytime soon, at least not until 2032. While the credit is scheduled to step down to 26% in 2033 and 22% in 2034 before phasing out for residential systems in 2035, it remains at 30% through the end of 2032. That means now is still a great time to invest in solar.

At Amy’s Roofing & Solar, we understand that tax incentives play a big role in your decision to go solar. That’s why we’re committed to providing honest, up-to-date information to help you make the best choice for your home and finances. Let’s explore how these legal changes will affect your ability to benefit from a solar installation in Sonoma County:

What Is the Federal Solar Tax Credit?

The federal solar tax credit is a government incentive designed to encourage homeowners to switch to renewable energy. It allows you to deduct 30% of your total solar system cost from your federal taxes, covering:

● Solar panel installation

● Battery storage systems

● Electrical work, including panel upgrades

● EV chargers

This credit can help you maximize your solar installation ROI and often translates into thousands of dollars in savings. This typically ranges from $5,000 to $50,000, depending on the size and cost of your solar installation in Sonoma County.

Will the Solar Tax Credit Disappear?

The federal solar tax credit (ITC) was extended in 2022 as part of the Inflation Reduction Act. In other words this tax credit is enacted as a law.  Congress is the only one that can repeal it. Since the ITC has benefitted both red and blue states, repealing it will harm most members of congress and their constituents.  Therefore, we do not anticipate the ITC being cut. However, stranger things have happened in our lifetime, so our recommendation is for you to get solar sooner than later to avoid the risk of tax credit cuts.

Here’s the timeline for the credit moving forward:

● 2024-2032: 30% credit remains in effect

● 2033: Credit drops to 26%

● 2034: Credit drops to 22%

● 2035: Credit phases out completely for residential solar installations (unless new legislation extends it)

Assuming Congress is acting in the best interest of their states,This means you have until 2032 to take full advantage of the 30% credit before it begins to decrease.

What Happens if Your Tax Liability Is Too Small?

One of the best aspects of the solar tax credit is its flexibility. If you don’t owe enough in federal taxes to use the full credit in one year, you can roll over the remaining balance to the following tax year.

For example, if your solar tax credit is $30,000 but you only owe $20,000 in federal taxes, you can apply the remaining $10,000 to next year’s tax return. This ensures you get the full benefit of the credit, even if your tax liability isn’t high enough to use it all at once.

Why You Shouldn’t Wait to Go Solar

To get the most out of this tax initiative, it’s a good idea to consider your solar installation rough costs and install your solar before the credit begins to downgrade.

Avoid Future Tax Credit Reductions

While the tax credit remains at 30% through 2032, waiting too long ould mean missing out on thousands of dollars in savings as the credit starts stepping down in 2033.

Lower Your Energy Bills Now

Going solar immediately allows you to start saving on electricity costs right away. With rising utility rates in California, switching to solar helps protect you from increasing energy costs and saves you tens of thousands of dollars over the lifetime of your system.

Take Advantage of Local and State Incentives

Aside from the federal tax credit, California offers additional incentives for solar and battery storage, including net metering benefits with your utility and rebates for battery storage systems. These programs are subject to change, so acting now ensures you maximize your savings. Give us a call for more information about these state-funded opportunities.

Increase Your Home’s Value

A solar system boosts your home’s value and makes it more attractive to future buyers. According to real estate studies, homes with solar panels sell for 3%-5%more than homes without.  This means you could buy solar today and sell your house tomorrow and make your money back.

Reduce Your Tax Withholdings to Maximize Savings

Since the solar tax credit reduces your tax liability, you may want to adjust your withholdings now instead of waiting for a large tax refund next year. Talk to your HR person about making adjustments to your W-4 form, you can keep more of your paycheck now rather than waiting for a tax refund later. Talk to your accountant about the best approach for your situation.

Frequently Asked Questions

Take some time to explore what other concerned Amy’s Roofing & Solar customers are asking:

Can the government change the solar tax credit before 2032?

While it’s always possible for Congress to modify tax laws, the Inflation Reduction Act locked in the 30% credit until 2032. Any changes would require new legislation.

Is there a limit to how much I can claim?

No, there’s no maximum cap on the credit. You can claim 30% of the total cost of your solar system, no matter how large.

Do I have to owe a certain amount in taxes to qualify?

You must have enough tax liability to use the credit. However, if your tax credit exceeds what you owe, you can roll over the remaining balance to subsequent years. . Additionally, if you are a 501c3 or if you do not have a tax liability, you can still benefit from the tax credit. Give us a call to learn more. 707-981-9801

Can businesses also take advantage of the solar tax credit?

Yes! Businesses can benefit from the same 30% tax credit for commercial solar installations. They may also qualify for additional depreciation benefits that reduce taxable income.

How do I claim the solar tax credit?

To claim the credit, you’ll need to:

● Install a qualifying solar system

● File the simple one-page IRS form  5695 with your tax return

● Include the total cost of your solar installation

It’s that easy!

Now Is the Time to Go Solar with Amy’s Roofing & Solar!

The solar tax credit is here to stay until 2032. If you’re considering solar installation in Sonoma County, now is the time to act while the 30% credit remains available.

At Amy’s Roofing & Solar, we’re here to guide you through every step of the process, from designing your solar system to ensuring you maximize your tax benefits. With our expert team, transparent pricing, and commitment to customer service, you can go solar with confidence.

Call us today at (707) 981-9801 or contact us now for a free consultation and take the first step toward energy independence!