Homeowner, solar energy saves you heaps of cash. It lowers or nearly eliminates your electric bills and provides safe, renewable energy that won’t harm the environment. As a result, you will enjoy some extra padding in your pocket and a healthier spring in your step because of the clean energy. To speed up the process of padding your pockets, you can even claim a solar investment tax credit, called an ITC.
What Exactly is an ITC?
Currently, this solar ITC will reduce your tax liability by 30 percent off the top of your taxes during the year. Unlike a tax deduction, which merely reduces your taxable income, you’ll see a direct reduction of the total tax amount you owe with this credit.
According to the federal policy, you’ll get every dollar of your solar investment returned, up to 30 percent of the total investment. This helpful solar tax credit means that you will be receiving the solar project at a hefty sale price.
You shouldn’t expect the credit to stick around forever, though. Based on current policy, the ITC will stay at 30 percent for businesses and homeowners until 2019. From there, the total credit will scale down to 26 percent in 2020 and 22 percent in 2021. By 2022, homeowners will receive no tax credit, and businesses will receive a significantly reduced credit of 10 percent.
The Evolution of the Solar Tax Credit
For over a decade, the United States has passed legislation in favor of incentives and tax credits for solar investments. In 2005, the federal government passed the first policy that enacted the ITC—the Energy Policy Act. With this policy, businesses and homeowners who invested in solar projects from 2006–2007 could receive the 30-percent credit.
Over the next several years, officials continued to extend the policy, encouraging the growth of solar projects in the US. First, the Tax Relief and Health Care Act extended the ITC until 2008.
Then, by 2008, officials saw the efficacy of the solar tax credit and expanded its reach for eight more years. In the Emergency Economic Stabilization Act, companies paying for the Alternative Minimum Tax could still receive the credit, and homeowners no longer had a monetary limit on their electric solar projects.
Finally, federal officials passed the Omnibus Appropriations Act in 2015. In this most recent ITC policy, both businesses and homeowners can still qualify for the credit as long as the solar project has begun construction by 2023. In the near future, federal officials are looking to expand this policy to various solar projects, such as solar car ports or energy storage. According to the Solar Energy Industries Association, the ITC has helped solar projects to grow by 1600 percent since 2006.
Are You Eligible?
Because officials extended the tax credit in 2015, you still have the chance to benefit from it. If you have purchased and installed solar panels for your home or developed a solar project for your business, you may be eligible for the solar tax credit.
You should certainly take advantage of the high ITC percentage while you can. Not only has the credit reduced the amount solar project owners pay in taxes, but the ITC has also lowered solar prices overall.
Plus, the SEIA expects the price to keep plummeting while solar projects continue to expand. In fact, they predict that solar projects will expand another 300 percent by 2020. In addition, the number of people employed in the solar industry will double, boosting the economy with increasing employment and business.Although federal officials have opted to extend the solar investment tax credit for over a decade, you can’t depend on this renewal in the long run. Why not install your solar project now? You’ll benefit from the clean energy while maximizing your return at the same time. With all the pros that solar has to offer, you simply won’t regret the decision