A Solar Investment Tax Credit (SITC) is a form of tax credit the Government offers nationwide to owners of commercial and residential buildings who invest in solar panels to harness renewable energy to reduce electricity consumption. What are the main benefits? Owners get tax deductions for the total cost of installing the solar panel system and even considerable savings on monthly energy bills.
The good news is that the Government announced a Solar Energy Tax Credit Extension for 2023. Stay with us as we tell you everything you need about these deductions, the percentages, eligibility criteria, how to apply, and much more.
Let’s dive in!
Understanding Solar Tax Credits
Definition of solar tax credits
The solar tax credit is a federal incentive the Government offers to commercial building owners who install solar panels on their property through December 2034. This type of credit allows property owners to recover a fixed percentage of the solar panel system’s cost and a lower cost per kW of consumption, making it attractive to taxpayers.
Importance and advantages for businesses in Florida
The Solar Tax Credit offers excellent advantages to businesses in Florida since it allows them to save money by improving their property, and the Government reimburses them a percentage of the installation. But there is much more to it:
- Savings on electric bills.
- Reliable and stable energy source.
- Not affected by power outages or blackouts.
- Reduce greenhouse gas emissions.
- Demonstrate commitment to environmental sustainability and social responsibility.
Overview of federal and state-level tax credits Tax credits are incentives created by the Government to ease the burden on taxpayers, in this case, allowing businesses in the Florida area to modernize their energy consumption sources for the planet’s sustainability and commitment to future generations. Its goal is to make it easier for businesses to make the transition. This type of incentive is not new in our state; since 1997, state legislators have promoted programs to transition to renewable energy and be more environmentally conscious.
2. Solar Investment Tax Credit (SITC)
- This benefit can only be claimed once, in the tax year, your solar panel system is installed.
- You can claim the Solar Investment Tax Credit if you installed them from 2006-2034.
- You can only claim it for the original installation of the system, not for reuse or upgrade.
- If you use your system for a community project and it does not exceed the electricity consumption standard.
- It only applies to taxpayers who own the system, not those who lease the property.
Pro tip: certified companies will calculate the value of the credit to be received in addition to the contract, so you know the value before you buy.
Details on the credit percentage and maximum credit amount
According to the Inflation Reduction Act of 2022, the maximum ITC percentage taxpayers could claim up to 30% of the total installation cost of their solar equipment. If the installation cost is $16,000, you could deduct a value of $4,800; if your tax is less than the credit amount, the difference will be applied to the following tax year.
Steps to claim the Solar Investment Tax Credit
- To claim the tax credit, you must only fill out income tax form 5695 and fill it with your annual income tax return.
- You must then include the installation of the solar equipment as part of the cost of ownership and the total cost of installation shown on the contract with your supplier.
- Enter the corresponding calculations on lines 6 (A and B).
- Complete the form’s final lines (15 and 16) with the exact amount to be deducted.
3. Solar Energy Tax Credit Extension Overview
In 2022 the Federal Government created the Inflation Reduction Act, which made it even more attractive for homeowners to transition to clean energy by incorporating a 30% income tax deductible ITC. The purpose was to reduce electric energy consumption and dependence on fossil fuels.
Importance and impact on businesses in Florida
The acquisition of the equipment could be an obstacle to using solar energy since it is a considerable investment. However, the Commercial Solar Tax Credit has excellent advantages, from using more stable energies with less environmental impact, efficient energy consumption, etc.
Details on the extension timeline and eligibility requirements
The Government offered a 30% ITC for 2022, whose value would decrease in the following years. However, they have decided to extend the value for 2023. Next year, homeowners will only be able to claim 26% of the total costs, and by 2035 the credit will cease to exist. To claim it, you must be the exclusive owner (not a lessee) of the solar panel system, and the equipment must be new or not previously used.
4. Commercial Solar Tax Credit
Eligibility criteria for businesses in Florida
Commercial building owners must only purchase a solar panel system by 2023 to qualify for the 30% ITC extension. They may not lease equipment or purchase solar energy from third parties.
Credit percentage and limitations
We have insisted that the value of the Commercial Solar Tax Credit for this year only remains at 30%, which you can deduct from this year’s tax return. That percentage is deducted from expenses such as:
- The solar panel system.
- The energy storage components.
- The installation cost: Those independent devices whose hourly consumption does not exceed 3Kw.
Pro tip: Remember that if you purchase other equipment that consumes this type of energy, its cost cannot be included in the credit.
5. How to Maximize Solar Tax Credits in Florida
Tips and strategies for businesses to maximize their solar tax credits
- The ideal time to purchase a solar panel system is in 2023 to take advantage of the maximum 30% ITC amount and be able to deduct it from your tax return.
- We suggest you purchase all the necessary storage components based on your property’s energy demands to add to your total cost deduction.
- Before purchasing your solar panel system, trust a certified company. Otherwise, you will not be able to apply for the benefit.
Considerations for solar system installation and documentation
- It is crucial to consider your property’s current and future energy needs when selecting the ideal system.
- Think about the geographic location of your property, the amount of sunlight it receives during the day.
- You should check the condition of the roof, its angle, and its orientation to see if it can support the system.
- Remember the permits you must apply for from the county to do this work.
Working with certified solar installers and tax professionals
The company you trust must be certified to handle this type of equipment. A professional will provide a contract indicating the price, time, and work schedule. They will also provide the manufacturer’s warranty document and an installation guarantee. Remember that a professional company will even calculate the ITC for installing your equipment so that you have an idea even before you sign.
The advantages of the Commercial Solar Tax Credit for businesses in the Florida area are many; not only does it allow you to switch to more stable, sustainable, and efficient energy sources. It protects your equipment from events such as power failures or outages and allows your business to run smoothly without leaving a footprint on the environment. It also allows them to obtain a decrease in their income tax return and is a more economical option in the long term since installing solar panels reduces the consumption of Kw per month.
What are you waiting for to make the switch? Ready to install your solar panel system?
Trust Advanced Green Technology!