SOLAR UNIVERSITY – FEDERAL TAX CREDIT

With the recent advancements in solar technology, homeowners can now produce their own electricity instead of depend on utility companies to power their homes. And because of the federal tax credit, going solar through the end of 2019 is extremely advantageous, potentially reducing the cost of your solar panel installation up to 30%!

A tax credit is a reduction in the amount of taxes you owe. The typical homeowner that goes solar with Green Solar Technologies pays about $30,000 for a 6 kilowatt solar installation. For such a system, a 30% federal tax credit could reduce your taxes by $9,000—and that’s not even counting other credits available or promotional offers. If you know the eligibility requirements and how to claim it, taking advantage of this credit is very easy.

NOTE: We’re not tax people, so we don’t give tax advice. The material made available on this page is used to explain the federal tax credit, and is not designed to specifically solve any unique issue. Not everyone will be eligible, so please consult a tax professional before filing your tax credit.


Tax Credit Eligibility Requirements

To be eligible for the 30% Federal Tax Credit, you must meet the following requirements:

  • You must be the title holder of your property where solar is installed
  • You must own the solar energy system
  • Your solar energy systems must be installed by December 31, 2019
  • You must have federal tax liability to offset price of system installation

We offer exclusive ownership of the solar energy system to you with the installation, so there is no issue with system ownership getting in the way of you claiming your federal tax credit.

This Tax Credit Will Not Last Forever

The Federal Tax Credit is not guaranteed to stay in place for very long.  

  • January 1, 2020 it will drop to 26%
  • January 1, 2021 it will drop to 22%
  • January 1, 2022 it will drop to 10%
  • The Federal Tax Credit expires after 2022

* Those interested in going solar and taking full advantage of the Federal Tax Credit are advised to act very quickly.

Tax Credit vs. Tax Rebate

It’s important to remember that the Federal Tax Credit is not a rebate. Tax credits serve to offset the balance of tax owed to the govt (if you don’t owe tax to the federal govt, there’s nothing to offset against the cost of your system).

Tax rebates are payments (usually in the form of checks or despots) to the taxpayer even if they aren’t paying tax.

While most customers of solar qualify for the federal tax credit, some do not. Those that don’t pay federal income taxes will not be able to benefit from the tax credit. Additionally, if you’re on a fixed income, retired, or earned an income only part of the year, you might not pay enough taxes to take full advantage of this credit.

If you pay in sufficient federal taxes the year that you finance or purchase your system, then the credit can be applied to pay off the taxes paid. If you already paid taxes by withholding them from your paycheck, the federal government will apply the tax credit to a tax refund. This refund can be used to pay down the balance on a Green Solar Technologies loan. It’s important to consider that the tax credit can be carried forward one year, which means that you can use any remainder from this year as a credit towards next year’s taxes.

Example 1:

Homeowner #1 buys a $30,000 solar energy system. They are eligible for a $9,000 tax credit (30% of system costs). Through their employment they pay the federal govt $9,000 in taxes, but this is withheld on their W-9 so they end up paying nothing when they file. In this example, when the federal tax credit is applied to the $0 balance they pay the government, they receive a tax REFUND of $9,000 that they can then apply to their GST loan—or keep if they choose.

Example 2:

Homeowner #2 also buys a $30,000 solar energy system, but only pays $4,500 in federal taxes because they were on a fixed income. This customer did not withhold any money from their paychecks and pays the full $4,500 when they file. When the $9,000 tax credit is applied, they can only claim $4,500 of it because they only paid that much in taxes. In this example, the customer does not have to pay any taxes that year but they also will not receive a refund check from the IRS.

The good news is that any remaining tax credit can be carried forward and applied to next year’s taxes. In this scenario, if Homeowner #2 pays the government at least $4,500 in taxes for the following year, they can utilize the rest of the credit.

Optimizing the Tax Credit to pay down your GST Loan

GST’s loan is formulated to be flexible, convenient, and affordable. It’s intelligently configured so that if you use your federal tax credit or other savings to pay down your loan balance by 30% within 18 months, you’ll also lock in a low monthly payment for the duration of the loan.

Here’s how it works: For the first 18 months of your loan, your monthly loan payment will be the amount quoted to you in your loan agreement. After 18 months, GST readjusts your monthly loan payment depending on what percentage of the loan you paid down.

Here’s how the adjustment works:

If you make the entire 30% payment by month 18, you will lock in the low monthly payment you started with. If you pay down less than 30%, your monthly payments will go up after month 18. If you pay down more than 30%, your monthly payments will go down after month 18. It's your choice!

Bottom line: Regardless of what amount pay down, your interest rate will never change, and you will never have to pay more than your total loan amount (unless you incur late payment fees). We highly recommend that you consult a tax advisor about your personal federal tax credit eligibility to determine if you can take advantage of the tax credit and apply it to your loan.

To see if you qualify, or to get more information on how solar energy can help you save money and reduce utility company dependency, call (844) 765-8324 and a solar consultant will be able to walk you through the solar process and answer all of your questions.

* Applicability of Federal & State Tax Credits is dependent on your particular financial situation. If you have any additional concerns, please consult a tax professional regarding your eligibility.