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Should I Install Solar Panels?

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Tax Credit

In December of 2015, The Consolidated Appropriations Act was signed, extending the expiration date for PV and solar thermal technologies and introducing a gradual step down in credit values for these technologies.

Under the new guidelines a taxpayer is eligible to claim 30% of their qualified expenditures for any system that serves a dwelling unit in the United States and is owned and used as a residence by said taxpayer. These expenditures are treated as being made when the installation of qualifying technologies is completed. Should the expenditure apply to a new home, the “placed in service” date would be the date the owner took occupancy of the dwelling. Include expenditures are labor costs for on-site preparation, assembly of system, and required piping or wiring necessary to connect the equipment to the dwelling. Should the federal tax credit exceed the tax liability, the excess amount may be carried forward to the subsequent tax year. There are maximum allowable credits, equipment requirements, and other details such as:

Solar-electric property

• 30% for systems placed in service by 12/31/2019

• 26% for systems placed in service after 12/31/2019 and before 01/01/2021

• 22% for systems placed in service after 12/31/2020 and before 01/01/2022

• There is no maximum credit for systems placed in service after 2008.

• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.

• The home served by the system does not have to be the taxpayer’s principal residence.

Solar water-heating property

• 30% for systems placed in service by 12/31/2019

• 26% for systems placed in service after 12/31/2019 and before 01/01/2021

• 22% for systems placed in service after 12/31/2020 and before 01/01/2022

• There is no maximum credit for systems placed in service after 2008.

• Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.

• Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.

• At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.

• The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.

• The home served by the system does not have to be the taxpayer’s principal residence.

The American Recovery Act of 2009 was successful in repealing a previous limitation pertaining to the use of credit for eligible projects. Projects completed after December 31, 2008 are not subject to too these limitations.

Cal the tax professionals at MBS Accountancy Corporation and discuss the tax benefits of adding solar power equipment to your home or business.

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