Time is ticking for getting the best federal solar tax credit for your solar energy system. The solar Investment Tax Credit (ITC) can help you keep costs down, allowing you to deduct 26% of the cost of your solar energy system on your federal taxes. But you’ll want to get started soon because this deal from the government is only available for two more years.
Here’s how it works: Purchase and install your solar energy system in 2021-2022 and claim the ITC solar credit when you file your federal taxes. The tax credit allows you to deduct 26% of the cost of your solar energy system.
Residential, commercial, industrial, utility-scale — any solar project that begin construction in 2021 and 2022 will still be able to receive a tax credit at 26%. The ITC rate will drop to 22% in 2023, and finally, the residential rate will drop to 0% in 2024, while the commercial and utility markets will sit at a permanent 10%.
Since the ITC is a credit and not a refund, you can’t get more back than you owe in a single year. HOWEVER—you don’t have to worry about losing that credit. Remaining credits roll over to the next year so you get the most out of your solar credit.
You can expect to get as much as $9,000—OR MORE—off the cost of your solar energy system with the ITC, and we say MORE because there is no cap. And it applies to both residential and commercial systems.
However, the ITC only applies to the cost of your standard solar energy system, batteries not included. It is possible to have solar without battery storage, with a grid-tied solution that allows you to draw from the grid at night, and from your solar during the day.
You’re also eligible for the tax credit even if the solar isn’t on your primary home. If you own the home, and as long as you live there at least part of the year, you are eligible to claim the solar tax credit.
If you rent or lease your solar panels, the solar tax credit is not available to you. It is, however, available to whoever has leased you the solar panels. Time to own your power—don’t let them get all the credit!
Taking advantage of the ITC can help your solar energy system pay for itself even quicker than usual. But this 26% federal solar tax credit won’t last forever. In 2020, the current phase was extended, keeping the 26% tax credit rate for another two years.
Saving with Solar
Tax credits are one way to help you chip away at the overall cost of owning your solar energy system, and another way to make solar work for your budget.
Our team of experts at Simply Solar California can help you make the most of the federal tax credits and reduce the cost of your solar energy system overall. Get started today to make sure you don’t miss out on this phase of the ITC solar tax credit. The clock is running!