The new tax credit schedule for homeowners looks like this:

• 2021: 26%
• 2022: 26%
• 2023: 22%
• 2024: 0%

What is the solar tax credit?

The solar tax credit was established to support and expand access to solar energy for homeowners and businesses. Since then, it has spurred investment and research in renewable energy and as technology has continued to improve, the cost of going solar has continued to decline.

The tax benefit has also helped to stimulate job growth in the clean energy sector. In the past decade alone, American solar jobs have seen an increase of 167%, and that’s why I’m proud to be a part of why that number in California.

While the tax credit has been an excellent incentive to help more folks go solar and grow the industry, it was not intended to be permanent, lawmakers in Congress have been preparing for it to step down in 2021 and then fade out entirely in 2022. This extension is fantastic news for the thousands of homeowners to experience the benefits of low cost sustainable electricity — and it means you still have a chance to take advantage of bigger savings.

Who qualifies for the solar tax credit?

Your system will need to be installed by December 31, 2022 in order to qualify for the 26% credit. To be eligible, you must be currently paying federal income taxes. The solar tax credit is tied to your federal income tax burden — if you usually owe income taxes, it will reduce the amount you pay. If you usually receive a refund, it will increase the amount of your refund.  The tax credit can zero out what you pay for a year, but it is not refundable.

If you’re on a fixed income (i.e. veteran pension, social security), be sure to review your tax returns from last year to see how much tax you paid overall. If you do not have enough tax liability to claim the full credit in one year, you can roll over the remaining credits into the next year. Projects can take 2-3 months from contract to completion including all the engineering and permitting, so it’s best not to wait until December to make the call.

How do I get the solar tax credit?

You will claim the tax credit when you file your yearly federal tax return. When it’s time to file your taxes, you will need to complete IRS Form 5695 “Residential Energy Credit” to validate your eligibility for the tax credit and include this information when you file your regular income tax return (IRS Form 1040).

Please note: Since we’re solar folks and not tax preparers, we always suggest consulting with your tax advisor for guidance about your specific tax obligations.

Curious about your tax credit eligibility? We’d be happy to put you in touch with a tax professional that’s familiar with this section of tax law to help you determine your eligibility.

Tax Filing Resources:

• Instructions for Form 5695
  • IRS Form 5695
• Homeowner’s Guide for residential solar projects
• Business owner’s guide for commercial solar projects

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There’s a very clear reason why California became a 100% clean energy state – to reduce the impacts of global warming by reducing carbon emissions caused by humans. As a leader in combating climate change, California deeply cares about the global mission to save future generations from living on a planet that may be unbearable to live in. The state legislation passed the “100 Percent Clean Energy Act” (SB100) which requires all utilities to provide power from clean sources by 2045. The Senate Bill is designed to phase out energy sourced from fossil fuels over the next 27 years.

SB100 was originally written by California Senator Kevin De León and introduced to legislation in January 2017. De León, who came into office in October 2014, is California’s leading advocate for clean energy and climate policies. In 2015 he authored and passed Senate Bill 350 which requires all utilities in California to provide 50% renewable energy to their customers by 2030. With SB100, utilities must be 60% renewable by 2030.  Hence, you can credit the state’s politicians for the growth we have to the solar and wind energy industries.

Why Does California Care?

So why is California so committed to environmental policy? Simply because it has no choice. California’s environmental policies are based on global warming events the state has experienced first hand.  There’s no question that California is special yet so prone to conditions affected by global warming.  According the Office of Environmental Health Hazard Assessment, California has experienced serious weather events within recent years.  The last 4 years were the warmest on record with extremely hot days and nights becoming more frequent. Just this year, Los Angles experienced more than 4 consecutive record heatwaves within a 30 day period. The state also became drier, due to it’s longest drought on record between 2007-2016.  Massive brush fires have also been an unfortunate after effect of global warming. This year’s Mendocino and Carr fire’s and last years Thomas fire burned over 2.4 million acres releasing millions of tons of CO2 into the atmosphere.

Climate change has become a major concern for the global community within the last decade. Regardless of public and political disputes, the latest scientific research on the global warming has been indisputable.  Consensus among scientists who study climate over the past 100 years all agree that global warming is fueled by human activities that increase the amount of greenhouse gases (GHG) into the Earth’s atmosphere.  Al Gore’s documentary, An Inconvenient Truth, addressed the facts of climate change to educate and bring awareness to a broader audience. The fundamental message in the film explains the scientific research and warns us about the consequences we face if we continue polluting the planet with man made carbon emissions.

Time For Positive Change

Within the last 20 years, Earth has seen the most abnormal weather conditions on record.  Countries from around the world are experiencing extreme weather events from hurricanes, typhoons, and rain bombs to droughts, heatwaves, and fires.  You can say that California is now not just the “Golden State” but also the “Clean State”. The Global Warming Solutions Act of 2006 is one of many state policies passed to combat the rise of greenhouse gas (GHG) emissions.  The Paris Agreement, which California is committed to, requires all members (countries) to reduce their carbon emissions and limit the Earth’s temperature increase to 1.5 degree Celsius. Although the Trump Administration plans to renegotiate or exit from the Paris Agreement, it won’t stop California’s future in sustainability.

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