Since being introduced in 2006, the Solar Investment Tax Credit (ITC) has helped the industry grow by 10,000%. The Solar Tax Credit is a dollar for dollar tax credit worth 30% of the system cost with no limits.
This incentive can be used by homeowners and business owners alike. For example, if the solar investment was $20,000, the solar owner is eligible to pay $6,000 less in federal income taxes for the taxable year that the system was installed. This incentive fueled the early growth of the industry. Some states have great solar incentives themselves, like NJ’s SREC, but the ITC makes solar competitive in all US markets.
The Solar Tax Credit is a solar incentive in which many homeowners think they can’t take advantage, but the truth is, most solar customers can absolutely take advantage of this incentive.
Even with a solar loan, which is the most common solar finance option at Green Power Energy, you can take advantage of the solar tax credit. There is also often confusion around whether you can take advantage of the solar tax credit if you expect to get a tax refund. If you are a W2 employee, your federal taxes are taken out of your paycheck automatically at a rate set by yourself, the payroll company, or your employer. If you receive a refund at the end of the year, it is because there was too much in taxes taken out of your paycheck. If you installed solar in that same taxable year, your refund would be even higher. Sometimes if someone is disabled or retired and not receiving the type of income required to take advantage of the tax credit, we may recommend our solar PPA or solar lease program which has the solar tax credit built in to its rates.
Originally, the program was set to expire after 2015, but thankfully there was an extension pushing the tax credit through 2019.
Now we are faced with the sun setting of this solar incentive which should be a huge sense of urgency for people who have been considering solar for some time. Right now, in 2019, the solar tax credit is still worth 30%, but after this year it starts to go down. The solar tax credit going forward will be 26% in 2020, 22% in 2021, and then in 2022 it goes down to 10% commercially. A silver lining for those who waited to have their solar system installed is that the solar tax credit is based on the “commencement construction.” This means that if the solar construction starts in the taxable year, but finishes in the next, it is eligible for the tax credit in the year the project was started. No need to worry if your solar array is not operational before the end of the year.
In previous articles, we have written about the time frame of a solar installation. The average time frame will be between 3-4 months from signing up for solar until the solar array is installed. We encourage customers to sign up today for their solar system so they have a chance for the full 30% tax credit for 2019. Green Power Energy is solar company that wants to make sure our customers can take full advantage of eligible solar incentives. We are not, however, CPAs or accountants. We recommend defaulting to your tax expert if you are unsure whether or not you can receive the solar tax credit.