Here’s How to Claim the Solar Tax Credit on Form 5695
Exploring the world of solar energy brings its own set of rewards, not least of which is the Residential Clean Energy Credit, more commonly known as the Solar Tax Credit. This federal incentive not only sweetens the deal for homeowners making the switch to solar but also offers a tangible return on investment come tax season. But how do you claim the Solar Tax Credit for yourself? Here’s how you can claim every dollar you’re entitled to.
What is IRS Form 5695?
IRS Form 5695 serves as your golden ticket to claiming the Solar Tax Credit on your tax return. It’s the official document for reporting the installation of solar panels and other qualifying energy-efficient improvements to your home.
Think of the IRS Form 5695 as the bridge connecting your eco-friendly efforts to potential tax savings. The form delves into the specifics of “Residential Energy Credits,” allowing homeowners to calculate and claim non-refundable credit for eligible energy-efficient home renovations.
The Solar Tax Credit
The Solar Tax Credit can significantly reduce your federal tax liability. For the year 2024, the credit is calculated at 30% of the total cost of your solar energy system, including installation.
This dollar-for-dollar tax reduction typically provides a substantial decrease in the taxes you owe, possibly leading to a refund. To qualify, your solar energy system must be in service within the tax year in question, and yes, you need to complete IRS Form 5695 to stake your claim.
A Step-by-Step Guide to Claiming Your Solar Tax Credit
The journey to claim your Solar Tax Credit is a meticulous one, requiring a careful walkthrough of Form 5695:
Step 1 – Calculating Your Solar System’s Total Cost
Start by jotting down the gross total spent on your solar power system. Remember, this is before subtracting any state tax credits or rebates you’ve received.
Step 2 – Adding Other Energy-Efficient Improvements
Got more green upgrades? Add the costs of any additional energy-efficient improvements to lines 2 through 4. This could be anything from a solar water heater to a small wind turbine.
Step 3 – Working Out Your Tax Credit
Multiply the total from line 5 by 30% to find out the size of the tax credit pie you’re eligible for. This figure goes on line 6.
Step 4 – Entering Your Tax Credit Value
If you don’t have any carryover from fuel cells or previous years, place the value from line 6 on line 13.
Step 5 – Assessing Your Tax Liability
Now, figure out if you have sufficient tax liability from your taxable income to see if you’re eligible for the full 30% tax credit.
Step 6 – Finding Your Maximum Claim
Flip to page 4 and fill out the worksheet to see the maximum tax credit you can claim. This includes all the other credits you qualify for—anything from being a first-time homeowner to buying an electric vehicle.
Step 7 – Finalizing Your Claim Amount
Put the result of line 6 on line 14. Then, compare the values of lines 13 and 14. The smaller value is what you can claim this year. Put that value on line 15.
Step 8 – Calculating Carry-Over Credit
If your tax liability (from Step 5) is less than your tax credits, you can carry the difference over to the next year. You can calculate the amount for next year’s taxes by subtracting the value on line 15 from line 13, then entering the result on line 16.
Step 9 – Bringing It Home on Form 1040
The value on line 15 is what the IRS will deduct from your taxes this year. Make sure this number lands on line 5 of Schedule 3 on Form 1040.
Make the Switch to Solar With Confidence!
Have questions about solar energy or need guidance on making your home more energy-efficient? Solar Bear of Tampa is at your service. Our expertise isn’t just in harnessing the power of the sun—it extends to helping you understand the benefits that come with it, including the Solar Tax Credit. Call us today at (727) 471-7442 to learn more!
