Important information about filing for the solar Investment Tax Credit

April 15th is traditionally Tax Day but due to the ongoing national health crisis, the IRS has granted a three month reprieve for filing both Federal and State of IL taxes. The new deadline is July 15th, 2020. This means there is still time to file for your 2019 investment tax credit for installing solar.

For our customers that have installed solar in the past year and for those considering solar we want to remind you that the tax credit, also known as the solar Investment Tax Credit (ITC), does not automatically happen.  The ITC is not a tax refund, rebate or tax deduction.  It’s a tax credit and there is a process through your tax return in order to claim that.

If you work with a tax professional, make sure you notify them of your project and bring copies of your project invoice and any associated costs (like permit or incentive application fees).  Without them knowing, or if you prepare your taxes yourself and forget, you may miss out on your tax credit.  Don’t let this happen to you!   We’ve heard stories from accountants that customers are working on tax preparation and forgetting to inform their tax professional they installed solar.  Yikes!

Homeowners must file Form 5695 which is the Residential Tax Credit worksheet to report your project cost and calculate the eligible tax credit.   Then the potential tax credit is based on 26% of your projects costs but then compared to your tax liability.  The result then determines the final dollar credit in any.  As a reminder, you must have tax liability to take advantage of the ITC.  Most folks can use a tax credit and therefore this has been a widely popular incentive offered by the Federal government.

If you have not yet installed solar, it’s advisable to work with a tax professional to make sure you can fully monetize the tax credit.  Overall, it’s a fairly simple process but you still must file correctly and understand what may or may not apply to your unique tax situation.

For commercial customers such as farms and businesses, solar also qualifies for accelerated depreciation and the IRS defines renewable energy equipment at 5-Year property.  Or, a customer might be eligible for Section 179 bonus depreciation and able to write-off, or depreciate, the solar investment faster.

For additional references, our previous blog post reviewed this in more detail.  We also covered the topic again on this post.

*DISCLAIMER:  Information within this article should not substitute the advice and counsel of your CPA or tax advisor.