What is the Solar Tax credit and how does it work?

It’s called the ‘Residential Energy Credit’ and its kinda like a gift card to the IRS.  But similar to retail gift cards, you can’t just go into the store and cash it right?  You have to use it in that store.  Same thing with the solar tax credit.  You have to apply it to your income tax bill.

w-2 Employees

If your a w-2 employee then you’ll have a withholding account.  Each paycheck, federal taxes are taken out and held to pay your income tax bill at the end of the year when you file your taxes. Instead of using your withholding account first, you’ll use your solar tax credit.  If you can’t use all of the credit, then it can be rolled over to the following year.

Self-Employed / 1099

If you’re self-employed or 1099 you don’t have a withholding account.  You make the full income, but have a full federal tax bill at the end of the year.  In this example, you would reduce the full income tax bill with the solar credit.

W-2 employees typically receive a larger refund and 1099/self-employed typically just reduce their tax bill.

If you are someone that would like to take advantage of the tax credit and want to see if you qualify, contact Supreme Solar today!


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