Do you want to know more about how to use the federal tax credit that comes with setting up a solar power system in your home?
Here is our complete guide to the Residential Clean Energy Credit, also called the Solar Tax Credit, which gives you a deduction of up to 30% off the total cost incurred in installing a solar-based power system in your home.
The solar tax credit is basically known as the Investment Tax Credit (ITC), which was formed as part of the Energy Policy Act of 2005. This is a complete guide to the homeowner’s solar tax credit.
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What is the Federal Tax Credit?
A federal tax credit is a reduction in the taxes you would have to pay otherwise. This is what, in other words, helps taxpayers deduct a certain amount of money, dollar for dollar, from their taxes.
The concept of a tax credit is obviously different from that of a tax deduction, which actually cuts off a portion of the taxpayer’s taxable income and thus reduces your total tax due, while the former gives you a credit for the deduction in your taxes.
| Federal tax credits help reduce your tax obligations, as accumulated credits allow you to deduct dollars for dollars from your taxes. |
As you may know, there are different types of tax credits whose value is determined based on the nature of the credit, which depends on factors like the purpose, the individual, the business, the location, the industry, and more.
Here, as you already know, we are talking about the federal tax credit on solar energy, which was designed to subsidize the cost of setting up a green energy system as a means to promote it over traditional sources of power for residential power.
| The solar tax credit applies to a percentage of the money you spend on your solar system. It is 30%, which means you can deduct that amount from your taxes. |
What is the Solar Tax Credit in 2023?
The federal solar tax credit for the year 2023 is 30%, which means you can claim that percentage of the cost of a residential solar system in your taxes. The credit does apply to the other green energy sources as well, but that’s not what this article is about.
Congress passed legislation in August 2022 increasing the tax credit to 30%, up from 26% in 2020 and 2021, as a move to fight inflation.
The increased 30% credit will stay until 2033, and it will fall to 26% in 2033 and 22% in 2034. The overall solar tax credit will end in 2035 unless Congress reviews and renews it then.
What Expenses are Included in Solar Tax Credit?
| What is covered? Solar panels, solar-chargeable battery packs, and backup systems with a minimum capacity of 3 kWh, as well as wiring, brackets, and other accessories and installation costs. |
The solar tax credit covers the cost of both solar panels and the storage systems that go with them. It is clear that the tax credit will obviously cover solar panels and other green energy technologies.
But it is to be noted that, apart from solar panels, storage systems like solar home backup systems and battery packs can also be a part of your calculation for the tax credit.
There is a catch, though. The solar backup system must have at least 3 kilowatt-hours of power if it is installed after December 30, 2022.
Interestingly, most of the market’s recent solar-based home backup systems, for example, the Mango Power E, have a storage capacity of over 3000 kWh.
Also, the tax credit covers the cost of buying all the necessary accessories, such as wiring, mounting brackets, installation costs, and even sales tax.
How Do I Claim the Federal Solar Tax Credit?
I think that figuring out if you are eligible is the first step in getting the solar tax credit. You need to start by ensuring that you have a sufficient tax liability that you can save on by claiming the credit.
Even if you don’t have enough tax liability, no worries; you can indeed roll over the rest of the credits for the next year. If it is the case that you are retired or have no income and no tax due as a result, you can get the credit back in the form of a refund, however.
The next step is to fill out IRS Form 5696. This is the document you need to submit to get the tax credit on your tax return. You can get a copy of the form on the IRS website and learn more about the tax credit there before filling it out and applying for it.
Lastly, once you know what tax credits you are eligible for, you can apply for them on Form 1040 while filing your tax returns.
Do Solar Generators Qualify for Tax Credit?
Yes, they do. Any solar-based storage system designed for home power with a capacity over 3 kWh qualifies for the federal tax credit.
There is no distinction between whether the system is meant for home backup or emergency use. The only requirement is that you install it in your home.
| Any home-based backup system powered by solar and with a capacity of over 3 kWh qualifies for the federal solar tax credit. |
Even though portable solar power stations don’t usually qualify for the credit, you can definitely make a claim for a system on an RV or motorhome if it is your primary or even secondary home.
You can confirm the details with an experienced tax consultant for more information.
The Benefits of Using Mango Power Solar Generator
The Mango Power E is one of the best of its kind of home backup and portable power systems out there. With a higher storage capacity, it is certainly one of the options you can get with federal solar tax credit benefits.
It has a basic storage capacity of 3.5 kWh and an inverter of 3000 watts. The lovely thing is that you can crank up its capacity to a massive 14 kWh to make it your complete home backup system, adding a solar charging input of 2000 watts.
By pairing two units of the Mango Power E, you can achieve a total capacity of 7.06 kWh with an output of 6000 watts at 240 volts. That is how it becomes one of the best options on the market for home backup power, which, along with your existing or new solar panel array of up to 2000 watts, can store a large amount of green power for home use.
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| Buy Mango Power E on the Mango Power Website (paid link) |
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The high-capacity home backup system is equipped with high-quality LiFePO4 battery cells that can be charged at a faster rate. Increased reliability and longer shelf life are the other two key attractions of the LFP battery packs inside Mango Power E.
The heavy-duty battery pack comes with a pair of highly durable and solid wheels, so moving it from one place to another is a simple job.
With multiple charging outlets, including four AC sockets and a 30A port, you can use the machine to run a wide range of your power-hungry appliances and electronics at home or outdoors.
Credit: The Main Image by Freepik
Vahid Vee is a full-time blogger who is highly passionate about off-grid and sustainable power systems and is an expert at researching and exploring new topics, checking facts, and presenting things in simple language. As an avid observer of the global off-grid power and battery market, he is really excited to share with you the latest trends, fresh products, and other developments in the markets. #Contact Email @ veevahid@gmail.com – LinkedIn – Full blog profile.
