Which Tax Credit is Best? Solar Company in Denver Has Answers
Most homeowners cringe when they hear the word ‘tax,’ but not when ‘credit’ follows it! There are so many great reasons to electrify your home, not the least of which is how affordable and equitable it can truly be. As with anything governmental though, getting through to the finish line can be a hassle. At My Electric Home, we aim to be one of the best solar companies in Denver. To start you off right, we’re here to cover the two main federal tax credits, and touch on how you can combine them with local incentives.
Understanding 25C: Energy Efficient Home Improvement Credit
While both options we’ll discuss here offer similar credits, and have confusingly similar names, 25C focuses on heat pumps and anything not directly related to solar. For more information on what heat pumps are, check out this article. Essentially, they are energy efficient electric appliances, and the 25C credit can cover heat pump HVAC systems and water heaters.
25C will also cover electrical components like smart panels, and weatherization components. That means insulation, air sealing, and ventilation—surprisingly yes, by ventilation they mean windows and doors. The credit covers up to 30% of product costs capped at $2,000 for heat pumps and $3,200 yearly for all qualifying improvements.
Understanding 25D: Residential Clean Energy Property Credit
25D has a more limited scope of qualifying projects but has no cap or maximum dollar amount. This credit similarly covers 30% of the qualified costs but focuses specifically on solar panels and solar-related improvements. These adjacent projects are solar power storage technology like home batteries, solar water heaters, and geothermal heat pumps.
The reason those heat pumps are included here and not with air-source heat pumps in 25C is because they draw their heat from deep in the earth, similarly to how solar draws energy from the sun. One thing to keep in mind with 25D is that although there is no cap, it is still a credit; if 30% of your project cost is $10,000, but you only owe $1,500 in federal income taxes, you won't be paid out the remaining amount.
Denver Home Energy Rebates
There’s more to cover here than just credits for those in the Mile High City. Home Energy Rebates are available to help reduce the costs charged by the best solar companies, as opposed to credits which help when it comes time to pay your taxes. The list of improvements that qualify includes most of the ones we’ve already covered. At a high level, rebates are eligible for:
Installing new heating and cooling systems
Transitioning away from natural gas
Improving indoor air quality
What makes these rebates particularly attractive is that they can be applied directly at the time of service. Your contractor will deduct the rebate amount from the project cost upfront, eliminating the hassle of waiting for reimbursements. However, it’s essential to secure pre-approval for any rebates before work begins.
Getting Every Credit & Rebate Possible
To fully benefit from the available tax credits and rebates, it’s vital to be strategic, as there are even more opportunities beyond what’s covered in this article. Here are some tips to ensure you’re making the most of these incentives:
Plan Ahead: Consult with the best solar companies in Denver, like My Electric Home, to determine which improvements qualify for both federal and local incentives. Understanding the requirements upfront can help you avoid costly mistakes.
Stay Informed: Tax credits and rebates can change, so keep up to date with current regulations and offerings. Your solar contractor can be a valuable resource for the latest information.
Combine Benefits: When planning your upgrades, look for ways to stack different incentives. For example, energy rebates will cover upfront costs of solar upgrades, then 25D will apply to the remaining balance.
Document Everything: Keep thorough records of your expenses and any relevant paperwork, as this will be crucial for filing your tax credits accurately.
Ready For Solar Installers in Denver?
Our town is ripe with benefits for home electrification projects. With the combination of the 25C and 25D tax credits, as well as local Home Energy Rebates, homeowners can significantly reduce the cost of creating a sustainable future. We hope we have shed some light on these topics and made things seem a little less daunting. At My Electric Home, we work on qualifying projects every single day, so you’re in good hands.
Reach out to us today for an energy audit, and to discuss all your home electrification goals.
Disclaimer: The information presented here is for educational purposes only. It is not intended to provide specific tax guidance. For questions regarding your individual tax situation, we suggest consulting with your tax advisor.