Author: Guest
My husband and I are full-time RVers and we’ve also lived extensively off the grid. We love the freedom of being able to camp anywhere we can access versus being tethered to an RV park, so we decided to build a new solar system in 2019 to literally power up our RV lifestyle.
Some people avoid solar power for RVs because of the perceived expense of setting up a system. But we decreased the expense of our system by more than 30% thanks to two strategies: the solar energy tax credit and cashback credit cards.
Here’s how we saved thousands of dollars and, as a result, get to enjoy the freedom of a fully off-grid life.
First, what is the solar energy tax credit?
The solar energy tax credit is an amount of money that you can subtract from the taxes you owe to the federal government based on the fact you have purchased and installed a brand-new solar energy system. This is a tax credit versus a tax deduction. A deduction just reduces your taxable income, whereas a tax credit is a dollar-for-dollar reduction in the taxes you owe.
Although it’s often referred to as the solar energy tax credit or the solar tax credit, the real name is the federal investment tax credit or federal ITC. It was increased to 30% as part of the Energy Policy Act of 2005. This increase was meant to incentivize the growth of alternative energy and has provisions that can be applied to either residential or commercial solar systems. According to the Solar Energy Industries Association, the U.S. solar industry has grown by more than 10,000% since the 30% ITC went into effect. Needless to say, the incentive is working.
The 30% ITC first became available to consumers and businesses in 2006 and it was supposed to expire after 2007. But Congress has extended this tax incentive multiple times. It is currently set to expire at the end of 2021, but the amount of the credit is decreasing each year.
From 2006 to 2019, the federal ITC allowed for you to count up to 30% of the cost of your solar system as a tax credit. For 2020, you will be able to take a 26% credit, and you’ll be able to take 22% in 2021. It’s yet to be determined whether it will be extended again and at what percentage.
This is why my husband and I made it a goal to have our system installed and operational by the end of 2019. But if you’re just learning about it now, a 26% or 22% discount is still a major amount of money when you’re looking at spending thousands on a solar system.
If you are an RVer considering alternative energy, earning the solar energy tax credit by the end of 2021 is something you want to strategize for.
How can RVers take the solar tax credit?
Whether you’re a full-time RVer or live in your RV part time, you can take this credit. Many RVers, including myself, have successfully taken advantage of this credit over the past few years.
According to the U.S. Department of Energy, “The system must be placed in service during the tax year and generate electricity for a home located in the United States.” The guidelines also say you can take this credit if the solar system is installed on either your primary or secondary residence. Keep in mind, it does need to be a new system and you can’t be leasing either the solar equipment or your RV.
The credit can be applied toward purchases of solar system equipment like panels, wiring, or inverters, and also toward the costs of labor for installation, shipping costs, permit fees, sales tax, and more. My husband and I installed our own system, so we couldn’t take any credit for our own labor, but it was important to us to design and build it ourselves. If you’re not a fan of DIY projects or you don’t have the time, the solar energy tax credit can help you offset the expense of hiring someone to install your system.
Before you get too excited, if your credit exceeds the amount you owe in taxes, you won’t get money sent back to you. But don’t worry, you won’t necessarily lose out on your credit either. According to the Department of Energy, you can roll the remaining amount forward to next year’s taxes, though it’s not completely clear if this will remain true after the federal ITC expires.
Depending on your personal finance situation, you may want to sit down and do some tax planning to make sure you get the most benefit out of your credit.
Whether you file taxes yourself or hire a tax professional, you’ll need to include form 5695 in your tax filing. You’ll also want to keep all your receipts for any expenses you’re claiming for your credit.
How we leveled up our savings with cashback credit cards
We took the savings on our solar system to another level by stacking the solar tax credit with a couple of the best cashback credit cards. Because we knew we were about to spend thousands of dollars on equipment for our solar system, I applied for new credit cards beforehand that offered two key things:
A sign-up bonus
Rewards for spending
A sign-up bonus requires a new cardholder to meet a minimum spend of hundreds or thousands of dollars within a few months of opening the account. For example I earned $150 after spending $500 in the first three months of having my Chase Freedom card. Credit card rewards commonly come in two forms: cashback and travel rewards known as points and miles. An example of cashback rewards might be that you earn 5% back on purchases at a certain retailer or 1.5% back on every purchase you make.
Because we were going to spend the money anyway, these credit cards allowed me to earn hundreds of dollars in cash back with no additional effort. And because we were purchasing some major items, the minimum spend requirements were easily achievable.
We also took advantage of credit cards that offered 0% APR periods. If you use a credit card with a 0% intro APR, you won’t incur any interest charges on your purchases for a certain period of time, sometimes over a year. You basically get free financing. That could mean the difference between having to skimp on your new solar system because you’re short on cash versus putting together a powerful and stress-free system that will keep your household going for years.
The one caveat on this is that you must pay off your balance by the end of the 0% interest promotional period. Otherwise you’ll be charged interest, which offsets any cash back you earned.
Bottom line
Whether you’re seeking to cut the cord and amp up the freedom in your RV lifestyle or you simply want to support greener energy sources, installing a new solar system could be beneficial in multiple ways — and it doesn’t have to cost as much as you think if you incorporate the two strategies outlined above.
Installing a new system before the end of 2020 could earn you hundreds or thousands of dollars in the form of a 26% credit. But even if you’re still in the planning stages of an RV solar system, don’t despair. You’ll still be able to claim a 22% credit on your expenses for 2021. And all you have to do to earn rewards on your spending is use a cashback credit card.
Although there are plenty of ways to save money at RV parks, we save the most money by finding free camping now that we no longer have to be tethered to electricity. We also feel good about helping the solar industry grow and supporting renewable energy.
For us, a robust solar system has literally equaled freedom.
Becca Borawski Jenkins is a senior editor at FinanceBuzz and has been living and traveling full time in an RV for the past three years. She loves to write about saving money, saving for retirement, and cashback credit cards. You can find her, her cat, and her husband driving in a big circle around North America.
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Electronics, Exterior, Green Living, Heating/Cooling, Organic / Natural Products, RV Hacks, RV Repairs / Maintenance / Upgrades, RV Tips, Recycle, Solar
July 20, 2020 | 07:00 PM
Great article, thanks. I have a couple of questions. The picture included with article shows the panels on the roof; is that a permanent mount, and if so are the panels protected while you are driving? Did you upgrade your battery storage for power, and if so, where did you locate the additional batteries? And finally, are the panels charging batteries as you drive, or is this for stationary use only? Thanks Steve
July 20, 2020 | 04:23 PM
I would love to read all about the steps involved in your DIY solar system. Sounds exciting! Laurent Perron
July 20, 2020 | 04:37 PM
Where did you find information about hooking the solar up to your RV system?