Are you interested in installing solar panels onto your home, but you aren’t sure? Are you looking for more information on solar panels and their benefits? Have you heard about the solar panel tax credit, but you want to learn more about it?
Florida is the third-highest state that has the best solar potential in the entire United States of America. Although the state has great potential for the solar industry, Florida only ranks 14th in terms of how many solar systems are installed.
If you are a homeowner in Florida and you are ready to take advantage of all the incentives that come with installing solar panels onto your home, you came to the right place.
This brief article will discuss the different incentives you can receive when installing your solar system and other important information you need to know before picking your solar panel installer.
Solar Panel Tax Credit
Solar power is one of the fastest-growing electricity sources worldwide, and the solar panel tax credit has helped make that possible. Right now, the 26% tax credit is available to use for new projects in 2021 and 2022.
If you were considering installing solar panels on your home, the time to start is now. If you don’t start your project until 2023, the 26% credit drops to 22%. Projects that begin in 2024 will not receive any credits as of right now.
How the Tax Credit Works
As mentioned above, you have the opportunity to take advantage of the 26% solar panel tax credit, which is considered a non-refundable tax credit. With a non-refundable tax credit, you won’t be able to get more money than you owe in taxes.
Florida Energy Savings
In addition to the federal solar panel tax credit, Florida residents also receive tax exclusion on the solar system built on their homes. Naturally, whenever you add a solar panel to your home or do renovations, your home’s value increases.
With an increase in home value comes an increase in your property tax bill. Florida’s property tax exclusion provides a 100% property tax exemption for energy-efficient homes.
Another added incentive to switch to solar is the sales tax savings you receive when purchasing your solar system. The solar and CHP sales tax exemption saves you the 6% sales tax you would have had to pay without the exemption.
Florida Solar Tax Incentives
As mentioned earlier, any projects that started in 2021 or 2022 are eligible for the federal solar panel tax credit. If you outright own the solar system, you can still claim the tax credit.
However, you do not get those same tax benefits if you leased the solar panels or purchased the electricity produced from the system through a power purchase agreement. The company that provides the power purchase agreement or leases the solar system to you claims those credits.
How to Claim Solar Tax Credits
When it comes time to file your taxes for the year, you will need to have a few things before submitting for the tax credit. You will first need to make sure that your installation date starts before December 31, 2022.
Other necessary documentation:
- Fill out the IRS Form 5965
- Add the tax credits on your 1040 Form
You also will want to make sure that you collect any receipts related to the cost of your solar power. If you have any receipts associated with the cost of your solar installation, make sure you hold on to those as well.
Solar System Covered Expenses
You can claim expenses relating to your solar PV panels or the PV cells. An installation and balance of the system’s equipment, including wires and inverters, are covered.
Other covered expenses:
- Contractor labor costs
- Energy storage devices charged by the panels
You can claim any contractor labor costs, including any onsite preparation or permitting fees. The solar panels themselves must exclusively charge the energy storage devices. This includes any battery backup banks or any off-grid systems.
Residential Solar Panel Costs
The price of solar panel systems has decreased dramatically over the years. In 2008, the average American household paid about $8.00 per watt. In 2021, that number dropped to about $2.81 per watt.
If you decide to install a 6kW system on your house, with the price of $2.81 per watt, you can most likely expect to pay about $16,860 before your tax credits and any added state rebates. The overall cost for solar panels varies based on the size of the system. If you decide to obtain a different sized system, you can easily calculate the cost by measuring the size in dollars per watt.
Solar Panels and the Grid
A large majority of residential solar systems connect to the grid. If your solar panels overproduce electricity, the additional electricity is sent to the grid if you do not have a battery backup bank. You are eligible to receive bill credits for any overproduced electricity sent to the grid.
This solar incentive is called net metering. When your panels are not receiving adequate sunlight to produce energy for your home, you can utilize those bill credits to cover the cost of your grid electricity use. You won’t have access to these bill credits if you are off the grid because you are not connected to the grid.
If you are looking to build a completely off-the-grid solar system to reap the cost-cutting benefits, you will need to be able to store energy. You will need an extra-large solar panel system and a battery backup bank to ensure you have enough electricity when your panels aren’t getting enough sun.
Financing Solar Panels
If you cannot outright purchase your solar panel system, you have the option to finance them. You have the opportunity to lease your solar panels or to obtain a power purchase agreement (PPAs). If you can afford to do so, buy your solar panel system outright to reap the most energy savings over the lifetime of your system.
If you want to own your system but need assistance with the purchase, you can opt for a solar loan. These loans lower your cost to $0, so you can “purchase” your system now and pay off the loan monthly. Many customers notice that their monthly loan payments are similar to their electric bills before switching to solar power.
Solar Leases and PPAs
If you do not want to own a solar system but still want to have the system for your home, you can consider going through a solar lease. Power purchase agreements and solar leases do not require you to put down any money.
In this scenario, you are just hosting the system on your house, buying electricity from that solar company. Your electric price is set at a fixed rate. As mentioned earlier, because you do not own the solar system, you cannot reap the tax incentives.
Does My House Qualify?
There are a few factors you will need to consider before installing the panels on your roof. It is best to install solar panels on a roof facing the south with a slope between 15 and 40 degrees. You also will take the amount of sunlight that your roof gets throughout the day.
Solar panels need sunlight to produce electricity, so if your roof is shaded, you may not be receiving the proper amount of sun needed to produce energy. If you have a tree that could interfere with the sun’s light, you will need to make sure it is properly trimmed and maintained.
Solar System Installation Time Frame
Once the planning phase is complete, the actual installation only takes a few days. Setting up your solar panels for net metering may take a few additional days if you are setting up your solar panels. The technicians will want to make sure that the solar panels are correctly connected to the grid.
How to Pick a Solar Installer
It is easy to fall victim to choosing an installer who is cheap and inexperienced to cut down on costs, but that is not the best choice for you. To ensure that you pick the best installer for your solar panel system, you should choose a company with years of solar installation experience.
The company should also have the proper licenses and insurance for solar installations. While you are looking into your potential solar panel installers, take a look at their reviews. Customer reviews are a great way to gauge what went well and what did not with other customer’s experiences. You also can ask for them to show you their previous work as well.
Solar Tax Credits and Re-Roofing
Some contractors will tell you that you need a new roof to qualify for the tax credit, and that is not true. The IRS guidance for form 5695 states that some solar roofing tiles and solar roofing shingles qualify for the tax credit. If these tiles or shingles serve the dual function as structural support and electricity generation, they qualify for the tax credit.
Any costs that are related to re-roofing just for the sake of putting up a new roof before installation will not qualify. This new roof only serves as a structural component; it does not supply any electric generation.
Commercial vs. Residential Solar Panels
Residential solar panel projects pertain to installing solar panel systems on homes owned by individual homeowners. Commercial solar projects are on a much larger scale and can power a company’s operations or a whole town.
Residential solar systems hold a consistent size between an average of six to twelve kilowatts. On the other hand, commercial solar systems need more than 100 kilowatts to power a business properly. Before applying any solar panel incentives, the cost for a commercial solar system is about $200,000.
Solar Energy Disadvantages
Although solar panels have excellent cost-cutting benefits, there are some disadvantages that you will want to consider. One pain point many customers have is the initial cost for solar panel installation. Some companies allow you to lease their solar panels while paying down the overall fees to combat this issue.
Clients have also mentioned that there is an issue with intermittency. Sometimes there are days where it is cloudier than others, disrupting your energy output. You also have to take into consideration that the sun does not shine at night, so you will need to monitor your usage.
The solution to this issue is the bill credits that you can use for nighttime use. You also have the option to have a backup battery storage unit to hold any excess energy absorbed during the day.
Solar Panel ROI
Solar systems are fantastic investments in the long run as they have substantial rates of return. Not only do the solar panels add value to your home, but it also allows for you to eliminate any electricity bills in the future.
The average payback period for your solar panels is about eight years. The increase in utility electricity rates and lower cost for equipment make it easier for you to own your solar panels instead of leasing them.
Take Advantage of Solar Incentives Today!
The solar panel tax credit is a win for any homeowner or business owner interested in installing a solar system. The tax credit is an excellent benefit that can help you offset the costs associated with purchasing and installing the solar panel system.
Not only will you experience great cost-saving benefits, but you also know that you are helping the planet by creating clean energy. If you are looking for more information about the cost cutting benefits associated with installing your solar panel, contact us for a quote. Our knowledgeable team is licensed and experienced in handling your entire solar panel system project from start to finish.