IRS Pays Billions in Solar Tax Credits Amid Growing Scam Concerns

Vaseline3 weeks ago

0 3 minutes read

The federal solar tax credit, officially the “Residential Clean Energy Credit,” has become a popular incentive for homeowners to invest in renewable energy. The credit is due to the Inflation Reduction Act (IRA). It allows eligible homeowners to deduct up to 30 percent of the cost of installing a solar energy system from their federal income.

In particular, this tax break has led to a boom in solar installations in the United States.

The data shows that last year was a record year for solar installations, with 51% more gigawatts of solar capacity installed than the previous year. (That’s according to a market report from the Solar Energy Industries Association (HEADQUARTERS) and data analytics company Wood Mackenzie.)

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In addition, the IRS and the US Treasury Department recently revealed that residential clean energy payments to ratepayers have reached billions of dollars.

So, if you’ve been on the fence about whether to “go solar,” this tax credit may entice you to take the leap. But before you do, it’s also important to know that the increased demand and interest in solar panel installations has led to an increase in solar contract scams.

Here’s more on what you need to know.

IRS payments for solar tax credit exceed $6 billion

The IRS has paid out billions in solar tax credits since the program began.

Recent data shows that more than 1.2 million taxpayers have taken advantage of the Residential Clean Energy Tax Credit, claiming a total of about $6.3 billion. That translates to an average of just over $5,000 in people’s pockets for each eligible claim.

Rooftop solar panels were popular, with about 752,300 homeowners claiming credits specifically for those installations.
In addition, approximately 48,840 taxpayers claimed credits for battery storage systems.

How the solar tax credit works

The tax credit allows homeowners to claim 30 percent of the cost of installing a solar energy system on their federal income tax return. The credit it lowers your tax bill, and if you end up getting more credit than you owe in taxes, you can generally carry it forward to future years.

Proponents of the incentive say it makes renewable energy more affordable by helping lower the upfront costs of solar installation.

Who can claim? If you make clean energy improvements to your primary home — including solar panels or solar water heaters — you’re likely eligible for the tax credit. Make sure the system is on a property where you live most of the time and consult a trusted tax professional if you are unsure of your eligibility.

How much is the tax credit? The solar tax credit covers up to 30% of the total cost of your solar installation, including fit-out. There is no maximum dollar amount for how much you can claim (the credit is based on a percentage of eligible costs).

Note: The tax credit will remain at 30% until 2032. After that, it drops to 26% in 2033 and 22% in 2034.

This tax reduction generally applies to qualified expenses such as:

Solar electric panels and fuel cells
Certified solar water heaters
Labor costs for installation, preparation, assembly
Permit fees and inspection costs
Battery storage technology with a certain capacity

Use IRS Form 5695 when you file your federal tax return.

Beware of solar panel scams

While the solar tax credit can be beneficial, the Consumer Financial Protection Bureau (CFPB) warns of deceptive practices. Some companies use deceptive sales tactics and fraudulent contracts to exploit homeowners.

Scams can range from sending fake loan agreements to lenders to claiming inflated or nonexistent tax credits or claiming you’ll receive a rebate check from the government in the mail.

Specifically, the CFPB warns to guard against:

Promises of unrealistic savings
High pressure sales
Hidden fees or increased solar contract payments
Companies claiming to be affiliated with government programs

To protect yourself, research solar installation companies and verify any claims that a particular company is affiliated with a government program.

It is also good to:

Get multiple quotes from reputable installers
Read contracts carefully before signing
Be wary of door-to-door sales pitches

Tax breaks for homeowners: conclusion

Given the popularity of solar installations and clean energy tax credits, it’s important to be informed about the potential benefits and risks before signing any solar installation contract.

Also, don’t forget about other ways to lower your tax bill. The IRS offers several tax credits and deductions for homeowners and homebuyers, and the IRA contains other clean energy incentives, such as the federal electric vehicle tax credit.

Vaseline3 weeks ago

0 3 minutes read

Vaseline

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