Switching to renewable energy is not just environmentally friendly—it’s a smart financial decision. With Shedd Energy and the federal Residential Clean Energy Credit, you can significantly reduce the cost of installing clean energy systems like solar panels.* Here’s how you can benefit.
Understanding the Residential Clean Energy Credit
The Residential Clean Energy Credit allows you to claim 30% of the cost of installing qualifying clean energy equipment on your home. This applies to installations made between 2022 and 2032. In 2033, the credit drops to 26%, and in 2034, it decreases further to 22%. It’s important to note that this is a nonrefundable credit, which means it can lower your tax bill but won’t result in a refund if your tax liability is less than the credit. However, any unused credit can be carried forward to reduce taxes in future years.
Shedd Energy ensures that all our installations qualify for this credit. We can even provide examples of the necessary tax forms.
Who Can Benefit from the Federal Tax Credits?
Homeowners and Renters
Whether you own or rent your home, you’re eligible to claim the credit for clean energy improvements made to your primary residence.
Second Homes
You may also be eligible to claim the credit for a second home that you use part-time, but this does not apply to fuel cell property.
Home-Based Businesses
If part of your home is used for business, you can still claim the credit based on the portion of your home used for non-business purposes.
What Expenses Qualify?
Eligible expenses include the costs of purchasing and installing the following:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (starting in 2023)
Labor costs related to the preparation, assembly, installation, and connection of these systems also qualify. However, traditional building components like roof trusses or shingles are not eligible unless they directly contribute to generating clean energy.
Consider Subsidies, Rebates, and Incentives
When calculating your credit, it’s important to subtract any subsidies, rebates, or other financial incentives you receive from the total cost of the qualified property. This includes public utility subsidies and some state-level rebates. However, certain state energy efficiency incentives may not need to be subtracted, depending on federal tax laws.
How to Claim the Credit
To claim your Residential Clean Energy Credit:
- File IRS Form 5695: This form is used for Residential Energy Credits and should be submitted with your tax return.
- Claim the Credit in the Year of Installation: Make sure to claim the credit for the year the property was installed, not the year it was purchased.
Disclaimer
Note:
* Not everyone is eligible for credits, incentives, or rebates or can fully use them. Please consult your tax professional or legal professional for further information.
* Incentives are subject to change. The actual amount can be higher or lower than what is quoted, and may not stay at a fixed rate over time. It can also change based on the tax bracket you are in.