2022 may have been a pretty tough year. But it brought at least some good news to homeowners who made the switch to clean and renewable solar energy.
The Solar Investment Tax Credit (ITC)—which was supposed to be phased out entirely after 2023—not only got extended all the way through 2034. It was also increased from 26% to 30%.
For anyone who qualifies, claiming the ITC will obviously mean filling out some extra forms. And, though the work involved is minimal, the IRS has a way of making even the simplest tasks a headache.
So, today, provide step-by-step instructions on how to claim the new and improved Solar Investment Tax Credit.
Who's eligible
You have to own your solar energy system. If you paid for it with a loan, that’s fine. But, if your system is leased or you’ve arranged to purchase electricity from someone else who owns it, you’re not.
The system has to be located at your primary or secondary residence. If it’s installed at a rental property or someplace else where you never reside, you’re not eligible. You have to own your solar energy system. If you paid for it with a loan, that’s fine. But, if your system is leased or you’ve arranged to purchase electricity from someone else who owns it, you’re not.
Installation of your solar system must be completed in the tax year for which you’re claiming the ITC.
What you'll need
In addition to the standard Form 1040 for the year you’re filing, you’ll need two other IRS forms and their instructions:
schedule 3 (Form 1040), “Additional Credits and Payments.
Form 5695, “Residential Energy Credits”
The only other documents you’ll need are the receipts for your solar installation.
How to claim your credit
Step 1: Calculate how much you're due
First, you’ll need to determine your “qualified solar electric property costs.” That’s the total cost of your solar energy system, including sales tax, permit fees, inspection costs, and developer fees.
Enter the sum of all those costs on line 1 of Form 5695.
Form 5695 also lists several other eligible home energy improvements:
- Solar water heating (line 2)
- Small wind turbines (line 3)
- Geothermal heat pumps (line 4)
- Biomass systems (line 5).
If you installed any of those in 2022, enter its cost on the appropriate line.
Then add up lines 1 through 5 and put the result on line 6a. If your solar system is the only energy credit you’re claiming, line 6a will just repeat the total cost you entered on line 1.
To calculate your tax credit, multiply the amount you just entered on line 6a by 30% and enter the result on line 6b.