Colorado is one of the sunniest states in the US, with an average of 300 days of sunshine each year. That makes it an ideal place for using solar energy. If you've been considering harnessing the power of this Colorado sunshine to help improve your energy independence and lower your utility bills by installing solar panels, the federal and state, and local governments are making it more affordable by offering tax credits to homeowners who invest in this equipment. These credits are easy to claim, but you have to act this year. The federal solar panel tax credit expires on December 31, 2021.
Dec. 28, 2020 update: Extended renewable energy tax credits have been included in a $1.4 trillion federal spending package alongside a $900 billion COVID-19 virus relief spending bill.
The solar investment tax credit (ITC), which was scheduled to drop from 26% to 22% in 2021, will stay at 26% for two more years. This means that all solar projects that begin construction in 2021 and 2022 will be able to receive a tax credit of 26%. All markets will drop to a 22% tax credit in 2023.
Planning to get solar panels installed on your house in Colorado? Contact Solarise Solar today for a free solar consultation!
How Much is the Federal Solar Tax Credit 2021
The US government offers a Federal Tax Credit of 26% of the cost of photovoltaic (PV) solar panel systems that are put into "service during the (2020-2022) tax year and generate electricity for a home located in the United States". Translated, this means that if your solar panel system costs $10,000 you could claim 26% of that cost or $2,200 deducted from your Federal taxes.
The solar tax credit, reduced from the original 30% in 2005, is currently 26% through 2022 only. The credit will drop to 22% in 2023, and it will expire in 2024 unless Congress renews it. The ITC tax credit will be terminated in 2024, and a 10% tax credit for utilities and commercial entities will start that year.
Am I Eligible to Claim the Federal Solar Tax Credit?
Not every property or solar panel system qualifies for the credit. In order to claim the solar tax credit, these requirements must be met:
- The solar panels must be installed between 1/1/2006 and 12/31/2023
- The panels must be installed on your primary or secondary home (not a rental or commercial property)
- They must be installed on a property located in the United States
- The Solar PV system must be new or being used for the first time.
How Will the Federal Solar Panel Tax Credit Benefit You?
The federal Investment Tax Credit (ITC) makes the home improvement project of switching to a solar panel system more affordable for homeowners. The IRS’s tax credit applies to solar panels, solar battery storage, and other solar energy equipment, and installation.
This large federal tax credit adds to the upfront savings of zero down payment and low-cost financing offered by Solarise Solar. As a result, solar panels ROI happens much sooner than it did when the adoption of residential solar panels first began to spread in the United States.
Today, homeowners typically generate substantial savings on electricity bills over the long-term by cutting their use of the public grid or eliminating it entirely. That is due to the significant long-term savings they realize by shrinking, or even eliminating their electric bill. By some industry estimates, an average residential solar energy system saves homeowners from $20,000 to $40,000 over the life of the solar panels.
What Costs Does the Federal Solar Credit Apply?
The solar tax credit applies to both the cost of equipment, the cost of installation, and even the sales tax on the project can be included in figuring the rebate. There is no maximum for this credit. (However, if you finance the system, you can't include the cost associated with the loan or the interest.)
How Do I Claim the Federal Tax Credit for Solar Panel Installation?
The federal solar tax credit is easy to claim. You simply complete IRS Form 5695 and submit it with your 2021 tax return. The amount of the credit will be deducted from your tax liability. You don't have to itemize your deductions in order to claim the solar credit; it is a separate deduction. If your credit exceeds your tax liability for the year, you can carry over the difference to help offset your tax liability on your next tax return.
You will need to upload the following items during the online application process :
- Net Metering Agreement
- Our Solar License Number
Solar Sales Tax Incentive in Colorado
Colorado is one of many states in which a variety of incentives are available to make going solar affordable for most homeowners. As part of that effort, Colorado provides a state sales tax exemption (applicable to Sales and Use taxes) for homeowners’ purchases of solar panels and other solar energy system equipment. This sizeable upfront tax exemption effectively reduces the solar panel cost.
About the Colorado Property Tax Exemption
In addition to the Federal Solar Tax Credit, the State of Colorado offers a Property Tax Exemption for Residential Renewable Energy Equipment. This means that the solar energy equipment (such as the PV system) is exempt from property tax. This means that you don't have to pay higher taxes when you improve your home with solar. (This applies only to the solar equipment, not to the associated real estate.) While there is no statewide tax credit for solar energy installations in Colorado, many cities, towns, and municipalities in the state have their own tax credit programs.
Other Solar Rebates and Colorado Solar Tax Incentives
There is not a state-sponsored tax credit for solar panels in Colorado, but there are various rebates and solar incentive programs available. Regional utility companies and local city and county governments offer opportunities that make investing in sustainable energy even more affordable. Plus, utility companies in Colorado are required to offer net metering, which pays solar owners for the excess energy they contribute to the power grid.
Keep in mind that solar rebates and other incentives offered by utility companies, local governments, solar energy cooperatives, or other sources are subject to change or be discontinued at any time.
Some Colorado energy companies offer additional incentives to homeowners for installing solar panels for home use. Utility customers in Fort Collins, Colorado Springs, and Boulder, among others, can take advantage of such programs. Incentives range from flat-rate cash incentives for a Solar PV installation to per watt incentives for the energy that your new PV system generates.
While installing a solar energy system can be an investment, there are many programs that can offset the cost if you have your system installed by the end of 2021.
Get a Free Solar Panel Cost Analysis from Solarise Today
Solarise Solar, located in Colorado Springs, Colorado can help you get solar panels at the best possible. Colorado homeowners know and trust us to help them design their systems, order the equipment that makes the most sense for their property, and install the system. We are happy to help you make sense of all of the different tax incentive programs and rebates and make sure that you get all of the credits you qualify for.
You pay $0 down payment, so there is no upfront cost to purchase and install solar panels! Solarise low-interest financing keeps the total purchase price of your solar energy system lower.
The Solarise 30-Year Solar Panel Warranty gives you peace of mind throughout the life of your solar energy system equipment.
We take care of all permits, applications, and other paperwork necessary to obtain the required legal approvals, to activate your net metering system with the local electric company, etc.
For More Information on Solar Panel Installation, Schedule a Free Solar Evaluation near Colorado Springs
For additional information on solar tax credits and rebates in Colorado, call Solarise Solar at (719) 792-7725, or contact us online anytime.
*The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the IRS.