The 30% Federal Solar Tax Credit ramps down this year
Solar energy is one of the most popular home upgrades in the market today. Which is why when Congress approved the 2016 federal spending bill, they extended the solar investment tax credit (ITC). However, 2019 will mark the end of the current 30% rate. Beginning in 2020, the ITC will ramp down as part of a two-year phase out plan that diminishes the solar tax credit from 30% to 26%. While there are other incentives that help offset the costs of installing solar, the ITC is the most lucrative. Below, we cover important parts of the ITC and explain why starting your solar project now gives you the best return on your investment.
What is the ITC?
The solar ITC is a federal tax credit that allows you to deduct up to 30% of the cost of installing solar energy systems in homes and industries in the U.S. The ITC applies to both residential and commercial systems without a cap on its value and saving solar system owners over $5000 on the cost of installation. However, the current 30% rate is only in place through the end of 2019, making this the last year to secure the maximum return from this lucrative program.
In 2020, the ITC reduces to 26% and while that rate may sound good, it has a sizable impact on the payback period, extending it by a factor of several years in some estimates. Because when it drops to 22% in 2021 the payback period will extend yet again, meaning by 2022 onward, the residential ITC will no longer exist, but the commercial ITC will remain at 10%.
How can you qualify for the 30% solar tax credit?
If you want to qualify for the ITC, you must have a tax liability and you must own the system. However, there are a few more requirements you need to meet during the tax year:
- Your solar system must be installed by Dec. 31, 2019.
- You must own and not rent your home or business.
- Although it’s understandable that you might want to lease your solar panels to save money, leased systems do not qualify because the tax credit goes to the lease holder.
Once you confirm that you qualify for the incentive, you can claim the credit when you file your tax return during the year following when the solar system is installed.
How can HelioPower help?
The benefit of the solar tax credit can be boiled down to the benefits of installing a solar system in your own home or business. The very first advantage is the fact that you can claim 30% of the installation costs with no cap to how much your system costs.
Although we’ve started 2019, it’s natural to think you still have plenty of time to go solar. But, installing solar involves many steps as well as coordination with third party entities for permitting and commissioning. When 2019 approaches its end, more and more homeowners will be trying to complete their projects. Starting your project early will eliminate any potential stress on completion. So, if you would like to learn more about solar or interested in getting a customized quote, please contact us today!