Claiming Your NY State and Federal Tax Incentives


Tax season may be months away, but this year is different because it’s the year you installed solar panels on your home! It’s time to get that enormous 30% Federal and 25% State tax credits from your investment.

If you’re reading this and haven’t installed Solar on your home yet—what are you waiting for? Sign up here to get a personalized solar quote from WNY’s best installers. This lucrative opportunity is available for homeowners until the end of 2016, after which the Federal tax credit (FTC for short, not to be confused with the Federal Trade Commission) will be eliminated for residential and dropped down to 10% for commercial projects. The FTC was introduced in 2006 as an investment tax credit and extended for 8 years in 2008 as a part of the financial bailout bill H.R 1424. The 2016 election year will be a pivotal point in the future of Solar; however, with both parties agreeing that solar is a major investment in America’s future, it will come as no surprise that current legislation is proposing the FTC to be extended permanently after 2016.

What do I need to get started?

Here at CIR Electric our tax advice is as good as the next, so we suggest consulting with a tax professional before filing. Every individual has their own special case.

Let’s get to it, here are the things you need to claim the Federal tax credit:

  • A pencil and a calculator
  • IRS Form 1040 for your filing year
  • IRS Form 5695 for your filing year (Federal)
  • Form IT-255 NYS
  • Some patience

Fill out the 1040 as you normally would during tax season, stopping at line 53 where it asks for Residential Energy Credits, now turn over to form 5695. Line 1 of the 5695 asks for the amount of qualified solar electric property costs. The IRS defines qualified solar electric property costs as:

“Costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home does not have to be your main home. Include any labor costs properly allocable to the on-site preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home.”

So basically, any costs associated with installations and materials count. Be sure to deduce any number of grants and rebates to the original cost of the system. For example, NYS currently gives buyers a cash incentive through New York State Energy and Research Development Authority (NYSERDA) for the installation of residential and commercial PV systems. John Doe, who was quoted $20,000 for a 5kW system received $3,000 through the NYSERDA incentive (at $0.60/watt). Therefore, he would insert $17,000 in line 1 on his 5695 for federal as well as in box B of the schedule A section of his IT-255.

The tricky part to filling out these tax forms are in lines 14 and 4 from both forms, because it requires you to know your tax liability before the credit in order to claim the whole amount. Tax liability is another way of saying what you owe in taxes this year. A worksheet is provided in the instructions for Form 5695, but a quick online calculator can give you a general idea of what that might be. The tax credit can only offset what you owe the government, so $0.00 tax liability means $0.00 tax credits. If the amount of taxes owed to the government is less than the credits being offered, you can luckily carry over that unused tax credit for the next 5 years same for both Federal and State tax credits.

That’s it! Hopefully reviewing your current tax liability will help determine where you stand financially and also help you receive the largest tax return possible. Fill out our qualification form today to see if you are eligible for any of these tax credits as well as the NYSERDA incentive, and if you’re one of our current solar pioneers you know where to call us regarding any questions.