For both individuals and companies, solar panels provide the possibility of paying less for the daily use of electricity. Photovoltaic cells are the components of solar panels, and they allow the production of energy through sunlight, absorbing protons from the light and liberating electrons, creating an electric current. Because solar panels produce clean energy, governments often offer tax benefits to promote their use.
A tax credit is not the same as a tax deduction. A tax deduction is a legal method of decreasing a percentage of the income taxes you owe, while a tax credit reduces the amount of all taxes you have to pay, not only income tax. A tax deduction is subject to your income rate and the income bracket into which you fit, but a tax credit is not.
Tax Credit Benefit
There is a federal benefit of 30 per cent tax credit for the costs associated with the purchase and installation of solar panels. This total amount is limited only by what you pay in taxes. The government will not end up owing you money for putting in solar panels. If you install a solar panel in your home any time before December 31 of 2016, you qualify for the tax credit benefit. The tax benefit applies to any installation of a solar panel to your actual residence or any residence under construction now or at any time before 2016. If you have more than one home, the tax benefit qualifies for your principal home--the home you live in--and any second home you might possess. The tax benefit for the installation of solar panels does not apply for any home or apartment in which you live in as a tenant. The tax credit also applies to businesses that install solar panels on their buildings or offices.
To qualify for the tax incentive for the installation of solar panel, your panel and house must meet certain requirements. The solar panel has to be the main source of electricity for your residence, and your installation has to meet applicable fire and electrical code requirements. To qualify, the location of your home or residence has to be in the United States, and the residence must be a house, houseboat, mobile home, cooperative apartment, condominium or manufactured home.
How to Apply
For any solar panels installed from 2010 on, you need to take the tax credit from your 2010, or later, income taxes and submit the IRS form 5695 with your taxes for next year. Save your receipts for the solar panel purchase and installation, as well as a manufacturer's certification statement. This statement certifies that the product qualifies for the tax benefit, and the manufacturer has to sign it. The manufacturer should provide this certificate to you. If it does not, you should be able to find it on the manufacturer's website.
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