Although many tax credits in the United States are designed to help individuals and families with low incomes, disabilities, or children to feed. The federal government also offers lots of tax credits for promoting clean energy. The solar Investment Tax Credit is one example.
The solar Investment Tax Credit is a type of Investment Tax Credit, or ITC. It is a 26 percent tax credit for solar systems on residential and commercial properties, aimed to encourage residents and industries to use solar energy.
The solar ITC has proved to be one of the most important and effective incentives for promoting clean energy in the US. The section 25D of residential ITC regulates that, homeowners who have solar energy on their homes could apply the Solar ITC credit to their personal income taxes. This credit also applies to companies, which could lift the tax burden on the companies.
However, you need to be the owner of the solar system in order to earn this credit. If you sign a lease of PPA with a solar installer, you are not eligible for the credit. If you are eligible for Solar ITC, you need to file Form 5695 to claim your credit. Even if you cannot use up the entire amount of the credit in one year, the remainder can be carried over into future years as long as the tax credit is in effect. Federal government usually offers people who install the solar system the highest Solar ITC in the first year and a lower amount in the next year. It suggests that the credit is mainly intended for encouraging the installation of solar energy.