Taking Advantage of Tax Credits
Not only business can take advantage of tax credits, there are also credits for individuals to claim on their personal tax returns.
Section 25D
Residential Clean Energy Credit is extended. (§ 25D)
Prior to the Inflation Reduction Act of 2022 (IRA), the solar tax credit was originally 26% through 2022 and 22% 2023. Now, the tax credit is expanded to be 30% every year until the end of 2031, and reduced to 26% in 2032 and 2022% in 2034.
If you purchased a new home in California, it is required by law to have Solar panel either leased or installed with the purchase. If you purchase the solar panel, you will be entitled to take advantage of this credit for 30% of the total cost for the solar panel including installation.
Section 25C
Energy Efficient Home Improvement Credit modification (§ 25C)
Other than the Section 25D, Section 25C also provides a great tax benefit to individuals that subsidizes certain investments that can reduce energy consumption in homes. The Energy Efficient Home Improvement Credit (previously known as tax credit for nonbusiness energy property), expanded from 10% to 30% on qualified expenses.
The lifetime limit for taxpayer was also removed after the Inflation Reduction Act of 2022 (IRA), and the credit limit for different categories also increased comparing to 2023 from 2022. For more information, consult with a section 25C professional or us for more information.
The credit will expire after 2032.
Tax Forms
Attached form 5695 to your individual 1040 tax forms.
To claim these two type of credits, you would attach form 5695 with your regular federal tax forms 1040. If you are not sure how to fill these out, reach out to us Vincent Ha, CPA so we can assist you with the correct filing.
For any general questions, the instructions are available on the IRS website.
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If you think you might have missed any of these credits for prior year filing, or have purchased items that might qualify for any tax credit but is unsure, send us a message or make an appointment today with us to go over your situation!
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