The federal tax credit is not like a standard deduction; its value is not affected by your tax bracket. When buying a solar system, the tax credit is 30% of the purchase price. If, for example, you install a solar electric system for $40,000 you would be able to take a $12,000 tax credit on your taxes next year. Here are a couple examples of the impact of this tax credit:
Scenario One: The Smiths
John and Jane Smith have a combined annual income of $150,000. Due to their deductions this income is adjusted to $131,300, with a total tax liability for the year of $24,400. The total tax withholding the Smiths’ employers deducted throughout the year was $20,000. The Smiths install a Hamilton Solar system that costs $40,000 – making them eligible for the $12,000 tax credit.
Tax Bill Without Solar
| Total Tax Liability |
$24,400 |
| Total Tax Withheld |
$20,000 |
| They pay the IRS |
$4,400 |
|
Tax Savings With Solar
| Total Tax Liability |
$24,400 |
| Total Tax Withheld |
$20,000 |
| Tax Credit for Solar |
$12,000 |
| The IRS pays them |
$7,600 |
|
Scenario Two: The Roberts
Now let’s look at the Steve and Suzy Robert. Steve and Suzy have a combined annual income of $75,000. Due to their deductions this income is adjusted to $56,300, with a total tax liability for the year of $6,810. The total tax withholding the Roberts’ employers deducted throughout the year was $7,200. The Roberts install a Hamilton Solar system that costs $40,000 – making them eligible for the $12,000 tax credit.
Tax Bill Without Solar
| Total Tax Liability |
$7,000 |
| Total Tax Withheld |
$7,000 |
| They pay the IRS |
$0 |
|
Tax Savings With Solar
| Total Tax Liability |
$7,000 |
| Total Tax Withheld |
$7,000 |
| Tax Credit for Solar |
$12,000 |
| The IRS pays them |
$7,000 + $5,000 tax credit remaining for future use. |
|
