{"id":1039,"date":"2021-07-29T11:42:16","date_gmt":"2021-07-29T11:42:16","guid":{"rendered":"https:\/\/taxreliefprofessional.com\/?p=1039"},"modified":"2023-09-26T21:47:14","modified_gmt":"2023-09-26T21:47:14","slug":"a-homeowners-guide-to-the-federal-solar-tax-credit-for-2021","status":"publish","type":"post","link":"https:\/\/taxreliefprofessional.com\/filing-taxes\/a-homeowners-guide-to-the-federal-solar-tax-credit-for-2021","title":{"rendered":"A Homeowner’s Guide to the Federal Solar Tax Credit for 2021"},"content":{"rendered":"\n

Solar power is the way of the future in the United States. Today, there is enough solar power capacity to cover 18 million<\/a> households.<\/p>\n\n\n\n

The rapid transition to solar energy comes as no surprise. Homeowners can reduce their monthly utility bills while helping the environment at the same time.<\/p>\n\n\n\n

Even the federal government is weighing in to help entice homeowners to convert to solar. Uncle Sam is offering up a generous federal tax credit to help Americans pay for solar.<\/p>\n\n\n\n

Read on for a homeowner\u2019s guide to the federal solar tax credit. Explore how Americans are switching to solar by utilizing solar tax incentives.<\/p>\n\n\n\n

How Much Does Solar Cost?<\/h2>\n\n\n\n

Before we dive into 2021 federal tax credits, it is important to understand why they are necessary. Switching to solar is not cheap. The total project cost varies depending on a number of factors.<\/p>\n\n\n\n

The size of your roof is a major determining factor. Solar panels are installed on your roof and collect energy from the sun.<\/p>\n\n\n\n

Your home\u2019s energy needs dictate how many solar panels are necessary. A larger home consumes more energy and requires greater collection. More solar panels on the roof are ultimately going to drive the price higher.<\/p>\n\n\n\n

There are different types of solar panels and some are more expensive than others. You also have to pay for the labor to install the solar panels.<\/p>\n\n\n\n

The area where you live is going to drive the price significantly. Labor rates are more expensive in certain states.<\/p>\n\n\n\n

There is also a labor divide in urban vs. rural settings. More densely populated areas naturally have a higher cost of living. This leads to higher labor rates in cities as opposed to small towns.<\/p>\n\n\n\n

Hawaii is the most expensive state to switch to solar. The cost of importing materials is high and a 6kW system is going to run you nearly $20,000<\/a>.<\/p>\n\n\n\n

In the South, however, you can get the same system for less. In Florida and Arizona, for example, a solar system costs less than $14,000.<\/p>\n\n\n\n

Some states are offering up tax help for switching to solar as well. The amount and eligibility vary based on the state you reside in. Along with the federal solar tax credit, state assistance is going to reduce your total project cost.<\/p>\n\n\n\n

What Is the Federal Solar Tax Credit?<\/h2>\n\n\n\n

The federal government recognizes the significant upfront cost of switching to solar. At the same time, the government is prioritizing clean energy and wants to reduce costs. The federal government\u2019s solution was to pass a tax credit to help Americans pay for solar.<\/p>\n\n\n\n

Personal tax<\/a> credits are more beneficial to Americans than normal deductions. Instead of simply reducing your taxable income, a credit directly reduces your tax liability. A tax credit works as a dollar-for-dollar reduction in the amount that you owe the government.<\/p>\n\n\n\n

As far as the solar tax credit goes, you can deduct 26% of your alternative energy purchase. This 26% tax credit is in place until the end of calendar year 2022.<\/p>\n\n\n\n

There is a push to get Americans to convert to solar faster. The tax credit drops to 22% on January 1st, 2023. The tax credit is currently not on the books for any solar energy purchases made in the calendar year 2024.<\/p>\n\n\n

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\n Evaluate your tax situation\n <\/h2>\n

\n By evaluating your tax situation, you can identify areas where you may be able to reduce your tax burden and make informed decisions about your financial future.\n <\/p>\n \n \n\n\n

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