If
you own some sort of solar energy system for your home, no matter how
old or new it is, you’ll be delighted to know that it comes with
some additional benefits. Aside from the money you save on
electricity costs and the positive impact on the environment, your
solar energy system also makes you eligible for the solar investment
tax credit.
Unfortunately, The Solar Tax Credit can be one of the more misunderstood solar incentives. However, if you are employed and have some sort of taxable income, chances are you are able to take advantage of this incentive. If you’re into the idea of saving money, then continue reading – this was written for you.
A brief history of the
solar investment tax credit
The
solar investment tax credit, or ITC, was officially put into effect
in 2006 via the Energy Policy Act of 2005. Although it was scheduled
to expire in 2007, its popularity and effectiveness in promoting a
more environmentally-friendly economy, the U.S. Congress decided to
extend the expiration date several times. At the same time, the solar
tax credit helped the solar industry to grow by a whopping 10,000
percent.
How the solar
investment tax credit (ITC) works
As
mentioned earlier, you are eligible for the ITC as long as you own
some sort of solar energy system for your home. The investment tax
credit allows you to deduct from your federal taxes a whopping 30
percent of what it cost you to install your solar energy system.
Whereas
the credit used to only apply to residential systems, it now applies
to commercial systems as well. To make matters even better, the
government doesn’t put any cap on the value the 30 percent credit
applies to. Meaning, the ITC is a dollar for dollar tax credit worth
30 percent of your solar project costs, regardless of that value.
Therefore, many homeowners have been able to save nearly $9,000 on
installation costs by taking advantage of the ITC.
Current and future
expectations for the ITC
As
of today, the ITC is active and applicable for all homeowners who
utilize some form of solar energy system through 2021. However, the
Solar Tax Credit is slowly in the process of “sunsetting”,
meaning that it is expected to be phased out. It was recently set to
expire in 2015, but it was, of course, renewed through 2019. The
regression schedule of the ITC is as follows:
-
2016 – 2019: The ITC will remain at a massive 30 percent of
the cost of your solar energy system.
-
2020: The ITC will be reduced to a 26 percent federal tax
credit on the cost of residential and commercial systems.
-
2021: The ITC will be reduced to a 26 percent federal tax
credit on the cost of residential and commercial systems.
-
2022 onwards: In 2022, residential solar energy systems no
longer receive a federal tax credit. Commercial solar energy systems
will receive a 10 percent tax credit going forward or until further
notice.
As
we move forward, the solar tax credit will work on a “commencement”
standard. This means that if construction on the solar project is
started before the end of the year, it can be claimed in that taxable
year – regardless of completion. Also, the solar tax credit can be
carried over to future tax years if the full amount can’t be taken
in the first year.
Over to you
As
you can see, the Solar Tax Credit is quite the incentive to adopt a
solar energy system in your home or business. On top of saving money
on your electric bill and benefiting the environment, you’ll
receive a whopping 30 percent credit on your federal taxes.
If
you’re interested in investing in a solar energy system for your
home or business, the good news is that most solar loans will allow
you to take advantage of the solar tax credit.
Should
you have any questions on whether or not you or your business is
eligible for this incentive it is recommended that you contact your
accountant as Green Power Energy are not tax experts and, therefore,
are not able to give financial advice.”
Visit Green Power Energy for more information!