There are many rebates and incentives for installing solar panels. Are you interested in claiming the solar tax credit on your upcoming federal income tax return? If so, you will need to use IRS Form 5695. This form is used to calculate the amount of the credit you are eligible for. For solar panel installations done by December 31, 2022, you will receive a 26% discount, and 22% discount for installations done by December 31, 2023. Afterwards, you will not get anything. So don’t wait – get started on your tax return today and see if you qualify for the solar tax credit!
Things to Prepare
Before claiming credit for your solar tax, prepare IRS Form 5695 for 2022, IRS Form 1040 for 2022, receipts from your solar installation, instructions for the forms, a calculator, and a pencil. First, follow standard procedure when filling out form 1040. When you reach line 20, stop and start writing on schedule 3. This schedule uses your computations from line 5 on Form 5695.
Completing Form 5695
Form 5695 is used to claim the renewable energy tax credit for installing solar panels. The first step is to determine the cost of the solar panel installation. This includes the cost of the panels, labor, and any other necessary materials. Lines 1 to 5 consist of all the different energy property costs. Once you have determined the cost, you will need to calculate the tax credit. Line 6a requires you to sum up lines 1 through 5, while line 6b requires you to multiply line 6a by 25%.
Then, if you have not installed a fuel cell property, you can continue on to writing on line 12 next. If you have installed an energy property last year, you can carry forward the credit and input it into line 12. Afterwards, complete line 13 by summing up all credits from line 11,12, and 6.
Line 14 of Form 5695
The difference between credit for solar tax and Health Coverage Tax Credit or Child Tax credit is that solar tax credit is not fully refundable. This means that credit can only be claimed from owed taxes. On line 1 of the worksheet, write down your total tax owed. Step 2 requires you to declare all credits from other sources which are fully refundable and sum them all up. Finally, calculate your final tax liability by finding out the difference between line 1 and line 2. There you have it! The amount claimable for solar tax credit.
After you have calculated the tax credit, you will need to complete the rest of Form 5695. This includes providing your contact information, identifying the type of solar panel installation, and estimating the expected electricity production from the panels. Once Form 5695 is complete, you will attach it to your tax return and mail it in with your payment. By following these steps, you can collect the renewable energy tax credit when you install solar panels. Contact us at Solar Energy Solutions of America to find out more about solar panel installation.