Solar Investment Tax Credit (ITC)
What is the Investment Tax Credit?
The Investment Tax Credit, commonly known as the ITC or the Federal Solar Tax Credit, allows solar owners to deduct a portion of their solar installation costs from their federal taxes. Depending on your federal tax liability, the ITC can be taken in one fiscal year, or over the course of several years. The ITC is not a tax rebate, but rather a dollar-for-dollar reduction in taxes paid to the IRS. Originally established in 2005 to help promote a transition towards renewable energy, the ITC was first set to expire in 2007. However congress has since extended the deadline through 2023. The tax credit was initially at 30% and is currently at 26%, however the deduction is set to decrease in the coming years. Outlined below is the ITC step-down structure for the years to come:
- 2020-2022: Owners can deduct 26% of the cost of the system from federal taxes
- 2023: Owners can deduct 22% of the cost of the system from federal taxes
- 2024 and Beyond: Only owners of commercial solar systems can recieve a 10% tax credit. Residential owners will no longer be eligible to recieve any tax credit for solar.
As long as you are the system owner, you are eligible to receive the ITC as soon as the installation of the system begins. If you install a third party owned system on your home or business (in such cases as leased systems or those structured with power purchase agreements), you are not eligable to receive the ITC. This is one more great reason to purchase your solar array, rather than leasing!
Due to the decrease in the ITC over the next few years, solar companies are expecting an uptick in business and may have longer than usual lead times for commencement of new installations.
Don’t wait until it is too late! Call us today to get the 26% tax credit, and save on your new solar installation!