Solar Investment Tax Credit (ITC)
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. The tax credit is currently at 30% and through recently passed legislation the deduction is set to stay at 30% through 2032. Outlined below is the ITC step-down structure for the years to come:
- 2022-2032: Owners can deduct 30% of the cost of the system from federal incomes taxes
- 2033: Owners can deduct 22% of the cost of the system from federal income taxes
- 2034 and Beyond: Only owners of commercial solar systems can receive a 10% tax credit. Residential owners will no longer be eligible to receive 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 eligible to receive the ITC. This is one of many great reasons to purchase your solar array rather than leasing!
Please consult with your tax advisor for further details on how the ITC impacts your specific financial situation.
Call us today to get the 30% tax credit, and save on your new solar installation!