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Installing a rooftop solar panel system is a great way to save money on your electric bill, but it’s not just the cost of the power itself that you save on. In addition to reducing the amount of energy, you purchase, installing a solar system also comes with some generous tax advantages from the government. At Simply Solar, we’re proud to be the #1 solar installer serving Petaluma, Fremont, and greater San Francisco, so we’re here to shed some light on how the California solar tax credit works. 

Couple looking into their finances and tax credit brought on installing solar power.

Solar Tax Incentives in California

California offers an Incentive Tax Credit (ITC) credit for anyone who installs a solar power system, which effectively means that the government will subsidize a portion of the cost of installation by reducing your tax bill. But the amount of the tax credit is changing, and it won’t be around forever. For all solar systems that are installed and brought online in 2020, are eligible to receive a tax credit of 26% of the total cost of installation for the system, including all parts and labor costs. So if the total cost of your solar installation is $20,000, you’re eligible for a tax credit of $5,200, bringing the effective cost of the system to only $14,800.  

But the credit will decrease in the coming years, and it will soon expire entirely for residential systems. Here’s how the tax credit will change in the next few years:

  • 26% credit for systems installed in 2020
  • 22% credit for systems installed in 2021
  • 10% credit for systems installed in 2022
  • In 2023 and after, only commercial solar systems will be eligible for a tax credit of 10%

Keep in mind that this is a tax credit, not a deduction: so rather than reducing your effective income by 26% of solar installation costs, it reduces your tax liability directly. You can take the credit all at once or spread it over different tax years, and there’s no limit to the credit – it amounts to 26% of the installation cost no matter how low or high it is. 

 

Contact Your San Francisco Solar Installers

The Investment Tax Credit is a generous policy that significantly offsets the cost of new solar roofing. But it won’t last long, so make sure to take advantage of it! If you’re ready to take the first step, use our easy online form to request your free solar savings assessment today. We’ll help you understand your options for solar roofing and create a plan to help you make the switch to solar and take full advantage of all applicable tax breaks!