How the 30% Solar Tax Credit Works
How Does the 30% Solar Tax Credit Work?
The 30% credit is known as the solar Investment Tax Credit (ITC) and was designed to subsidize and boost the use of alternative energies like solar and wind power. Tax credits provide a dollar-for dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes.
The tax credit is 30% for solar power systems on residential or commercial properties. The residential ITC allows homeowners to apply the credit to their personal income taxes. For commercial entities, the business that installs, develops and/or finances the project claims the credit.
So if you purchase $20,000 dollars in solar equipment (including the cost of installation), you would be eligible for a $6000 ITC solar tax credit.
In order to take advantage of the tax credit, an individual or business entity needs to have the tax liability (owe taxes) and paid income tax for that year.
Many States also provide other rebate and incentive programs for residents and business that install solar power. Currently, there are no additional solar rebates in the state of Florida but with the cost of solar at an all-time low, and more and more easy and secure methods to finance solar, the investment is still better than paying your utility bill.
Since its inception, this tax credit has supported the growth of solar throughout the United States by over 1500%.
Starting in 2005, The Energy Policy Act kicked off the ITC both for residential and commercial solar energy projects that were to be commissioned between January 1, 2006 and December 31, 2007.
In 2006, the Tax Relief and Health Care Act extended these credits through 2008
In 2008, the Emergency Economic Stabilization Act included an eight-year extension of the solar tax credit, and eliminated monetary caps.
In 2015, the Omnibus Appropriations Act included a multi-year extension of the residential and commercial ITC described above and changed the previous “placed-in-service” standard for qualification for the credit to a “commence construction” standard for projects completed by the end of 2023.
The solar tax credit will remain in effect until at least 2021, with a gradual decrease in credit amount over that period. Both the residential and commercial ITC are 30% for projects started on and through the year 2019. The credit decreases to 26% in 2020, and then 22% in 2021.
After 2021, the residential credit will no longer be available and the commercial ITC will be 10% permanently.
Would you like to learn more about how you can take advantage of this tax credit now? Contact us TODAY