Tax credits are one of the ways that local, state, and federal governments can incentivize citizens to take action on particular matters. In most cases, tax credits reduce the amount of money paid in income taxes dollar-for-dollar, making it much easier for individuals and businesses to participate in the action the government is trying to incentivize, which is, in the case of the Solar Investment Tax Credit, converting to the use of solar energy.
What is the Solar Investment Tax Credit?
In 2006, the federal government introduced the Solar Investment Tax Credit, also called the ITC, as a means of encouraging individuals and businesses to convert to clean, solar energy and creating construction jobs to help the country’s economy, and it’s been incredibly successful. Since that time, the United States solar industry has thrived, growing by over 10,000%.
In 2015, the Solar Energy Industries Association negotiated for an extension of the ITC, allowing its continued success in converting to clean energy, creating jobs, boosting the economy, and helping businesses and individuals reduce their energy costs and consumption.
How Does the Solar Investment Tax Credit Work?
The amount credited through the ITC is based on how much money is invested in solar property. The program is graduated, meaning that in its early years the credits were fairly high but now credits are gradually being decreased. Currently, the ITC is worth a 26 percent federal tax credit for residential, commercial, and utility investors. Homeowners can apply this credit to their income taxes, whereas businesses can claim the credit outright after installing, developing, or financing a solar energy project. (2023 Update: Tax credit is now 30%!)
What is the Future of the Solar Investment Tax Credit?
All projects, residential or commercial, that have begun in 2020 are eligible for a 26 percent credit through the ITC. Unfortunately, as with all good things, the ITC will eventually come to an end. In 2021, the credit will drop to 22 percent for both commercial and residential projects. In 2022 however, the residential credit ends and will drop to zero, while the commercial credit will be reduced to a permanent 10 percent of the project amount.
If you aren’t sure whether your project is eligible for a credit, you can find out by using SolarReviews’ Solar Calculator.
Starting Your Residential, Commercial, or Agricultural Solar Project
Despite how much the ITC has caused the solar industry to grow, solar power still only makes up for a very tiny portion of all the energy produced in the U.S. The good news is that you can be a part of helping our country go green!
Renewable Energy Designed group has a wide array of solar options for all residential, commercial, and agricultural needs. Get in touch with us to schedule your consultation by calling 877-520-SOLAR, click here to learn more about how getting solar panels with us works, or find answers to frequently asked questions about solar energy by clicking here.