Solar Energy Tax Credit: Taking Your Financial Incentive

When it comes to moving towards greener solutions for your electricity, there are many reasons to take pride in switching over. You are contributing to the environment, saving money on your monthly bills, and setting a good example for homeowners in your community. Of course, one of the major reasons people switch is to take advantage of the solar energy tax credit offered by the government. The government offers these kinds of incentives to get people to switch over, boosting a burgeoning industry and contributing to a cleaner environment. Here's what you need to know about getting your proper credit.

Get the Right Forms

When it comes to getting a solar energy tax credit or doing anything else unusual when filing your taxes, the first hurdle you have to overcome is making sure you have the right forms. You'll need the 5695 form at present, but double check with the IRS to ensure that the number hasn't changed by the time you read this article. The government tries to make things as simple as possible for filers who want to take advantage of various credits, but their version of "simple" doesn't always match up to the average person's definition. You'll need to use the full 1040 form if you want to claim these incentives.

Know the Maximum

This is where things can get confusing, particularly if you're claiming credits for several purchases in a single year. Perhaps you're not only taking advantage of the solar energy tax credit, but also looking for a break due to your purchase of an efficient washing machine. In any of these circumstances, you'll need to know how much you can claim. For many appliances, there is a total maximum that covers any and all your purchases. For instance, even if you bought a high efficiency washing machine, a high efficiency dishwasher, and an energy saving refrigerator, you would not be able to get a full credit on each one. However, the solar energy tax credit is usually exempt from this, meaning you won't have to count it towards your total maximum.

Installation

For most energy efficient appliances, you can claim the cost of installation towards your tax break. The same is true of the solar energy tax credit, so make sure you keep good records of your receipts. While the filing will not likely require you to include these receipts when you send in the forms, you should keep them handy for a few years in case of an audit.