Home solar is in the midst of an unprecedented boom, thanks to plummeting solar panel prices that enable homeowners to save money on their utility bills.
Not only that, but the federal tax credit can reduce the cost of going solar by up to 30%, increasing your savings even more. Since the typical homeowner that goes solar with Mosaic pays about $30,000 for a 7 kilowatt solar installation, that tax credit can be worth up to $9,000 — quite a nice bonus!
As with most government programs, taking advantage of this incentive isn’t always a straightforward process, so here are some answers to common questions about how the tax credit works.
KEEP IN MIND: We’re solar people, not tax people, so we don’t give tax advice. Anything you read on this page is merely an example and may not be appropriate for your unique financial situation. Not everyone will be eligible, so please consult a tax professional before filing your tax credit.
Who Qualifies for the Tax Credit?
The federal tax credit is available to homeowners that own their own solar panels – that means that you can’t receive the tax credit if you rent your home or lease your solar via a power purchase agreement (PPA) or similar contractual arrangement. Availability of Federal & State Tax Credits is dependent on your unique financial situation. Please consult a tax professional regarding your eligibility.
How Much is It Worth?
The tax credit is worth 30% of the total cost of a residential solar installation, including all equipment as well as labor costs, for systems installed by December 31, 2019. After that it will drop down to 26% for systems installed by December 31, 2020, 22% for systems installed by December 31, 2021. Systems installed January 1, 2022 or later will not be eligible for any credit.
The actual amount of the tax credit you can receive will depend on how much tax you pay in the year your system is installed, plus the amount you pay the following year (since the credit can be carried forward up to one year). However, if you don’t pay much in income taxes, then you may not be able to receive the full value of the credit.
How Does the Credit Work with a Mosaic Loan?
Mosaic loans are structured so that if you decide to use the federal tax credit (or other savings) to pay down your loan balance by 30% within 18 months, you’ll lock in a low monthly payment for the duration of the loan. If you pay off less than 30% within 18 months, that’s fine too – but your monthly payments will be readjusted upwards depending on the percentage of the loan remaining. You should also know that a Mosaic loan gives you the same tax credit as if you purchased your solar system outright with cash, and that tax credit is yours to use however you like.
Will the New Presidential Administration Impact the Federal Tax Credit?
Fortunately, the current tax credits were extended on a bipartisan basis by Congress at the end of 2015 and continue to enjoy strong support from both sides of the aisle due to the jobs and investments that renewables have generated in both red and blue states nationwide.
The future of federal renewable energy incentives are never guaranteed, however, so the sooner you make the decision to go solar, the sooner you will be assured of receiving the full value of your tax credit.