Energy experts break down the relationship between passive income and solar panels: 'It's a significant opportunity'

As the federal government considers sunsetting solar energy tax credits early, industry experts are urging folks to explore their options ASAP. 

Timely action could save you as much as $10,000 by accessing the right tax breaks and finding the best installer, according to EnergySage, a vetted online resource that can help you unlock the greatest value. 

Unsurprisingly, the tax program is like an onion, with layers of incentives that can be accessed if you know how to apply them. A particular quagmire is deciphering how the credits are awarded to residential, commercial, and vacation properties, as well as how passive income factors into the calculations. 

"It's a significant opportunity," Pennsylvania's Paradise Energy Solutions CEO Dale Good said in a YouTube clip posted on the company's Solar Energy Channel.  

The incentives provide an up to 30% rebate on the cost of installing a solar system. Primary and second homes qualify. 

"Where it gets muddy is when you start renting," according to Good. 

Rentals are considered commercial properties, which come with their own tax codes and rules regarding depreciation and passive income. Good added that there are also giant benefits for solar through rebate "add-ons." Figuring out how much time the property is rented, and other factors, is key to unlocking them. In some cases, people with businesses in their homes use the enterprise to buy panels and sell electricity to their household, the expert explained. 

"There's a lot of ways to get creative here," Good said. He noted that he's not a tax pro. Consulting one for in-depth guidance is a good idea, especially when making sure passive rental income is properly documented. The earnings could impact tax credit eligibility.  

The breaks were bolstered by the Inflation Reduction Act of 2022, extending or creating clean-energy rebates that were intended to last a decade or more as part of the shift to a more planet-friendly energy system. But the Trump administration has a dirty fuel-friendly policy. And the president is on record stating that he intends to kill the program, which would require an act of Congress. A bill gutting many of the provisions is headed to the Senate, per the Associated Press. 

However, the incentives are wide-reaching, making them valuable all over the country. So a general elimination may not happen. Solar Builder, an industry-related magazine, reported that the commercial solar tax break might remain through 2028, while the residential portion might not survive the year. 

If you were to install home solar panels, which of these factors would be your primary motivation? Energy independence ⚡ Lower power bills 💰 Helping the planet 🌎 No chance I ever go solar 🚫 Click your choice to see results and speak your mind.

Knowing the difference and how to apply the tax codes to your situation could mean thousands in savings, according to Good. 

Solar panels can be powerful energy providers at home, generating abundant, cleaner electricity from the sun that will reduce or eliminate your utility bill. A government study found that the average household with solar saves nearly $700 a year after expenses. When combined with batteries and appliances, like a Cala heat pump water heater, you can stack even more savings while greatly limiting heat-trapping air pollution. NASA has linked the fumes to increased severe weather and, in turn, blackout risks.

Suncatchers can last more than three decades with a greater than 22% efficiency rate, according to the government and EnergySage. But breakthroughs in perovskite and other panel types are poised to increase longevity while converting more rays into electricity. 

As for the incentives, it's important to avoid being overwhelmed as you pursue the maximum benefits. Services like EnergySage — and an accountant — can "walk you through" the complicated parts, Good said in the clip. 

You can also check out EnergySage's mapping tool, which shows how expensive the average solar installation is in every state, as well as incentive details.

Join our free newsletter for easy tips to save more and waste less, and don't miss this cool list of easy ways to help yourself while helping the planet.