UPDATE: The tax credit has been extended and ENHANCED! Check out more details here.
If you’re planning to buy solar panels soon, but haven’t quite gotten there yet, chances are that you’re watching the federal solar tax credit closely. It could save you up to 26% on the purchase of a new solar energy system!
And right now, it’s set to expire for residential green energy systems at the end of 2021.
Could we see an extension to the solar tax credit in 2021? Let’s dive into the details.
Some Background: What Is the Federal Solar Tax Credit?
The federal solar tax credit, also known as the investment tax credit (ITC), is a federally backed tax incentive for solar energy. It was established through the Energy Policy Act of 2005. Though it was originally set to expire in 2007, its popularity helped push an extension.
Since then, the expiry date has been extended several more times. Now in 2020, the ITC is still going strong, helping to propel the US toward more eco-friendly, renewable, solar energy. That’s one reason it’s been popular enough to continue getting extended.
A fantastic savings opportunity for US buyers, the ITC currently allows you to take 26% of the cost of your solar energy system off your federal taxes.
It’s important to note that the percentage will drop (or step down) after this year (2020). More on this in a bit.
How Does the ITC Work?
Essentially, when you purchase a solar energy system (solar panels) for your home, land, or business, you can deduct 26% of the cost of your new system off this year’s federal taxes. Installation must begin prior to December 31, 2020, to get the full 26% rebate this year. Read on for more about the step-down of this deduction.
There is no maximum limit on the ITC; you can spend as much as you want on your new solar panels and still take 26% of the cost off your taxes. Also, the investment tax credit can be used with either residential or commercial solar systems. You can get this tax credit every year that you own your solar system.
NOTE: You must own your system in order to qualify for the solar tax credit. Leased systems are not eligible.
What Does the “Step-Down” Mean?
The solar investment tax credit is available for residential systems through 2021, though the percentage began stepping down in 2020. Initially, the ITC allowed 30% of the cost of your solar system to be deducted from your taxes.
At the beginning of 2020, that stepped down to 26%. It will decrease by another 4% in 2021 to 22%. The federal solar tax credit is set to expire at the end of 2021 for residential buyers.
Commercial systems will still be able to get 10% back in 2022 and beyond.
Ultimately, this means that you may want to purchase your new solar energy system sooner than later to save the most money. Especially if you’re a residential customer! This amazing tax credit is set to disappear for residential systems after 2021.
But the good news is, there doesn’t appear to be any opposition to extending this amazing federal tax credit once again! Even with a likely extension coming, we’re not sure how much the credit will give you after 2021. So, perhaps the time to buy is now!
For more on available credits and incentives, check out this recent post about solar rebates and solar incentives.
Solar Sam: Your Partner in Affordable Solar Energy Solutions
Solar Sam is a fast-growing local solar provider and solar installer based in Columbia, Missouri. Of course, we provide Missouri solar, Kansas solar, and Illinois solar, but we also service the entire continental United States. No matter where you are in the country, we can help you with quality solar energy solutions!
We pride ourselves on carrying the latest tech, hottest brands (like Jinko Solar and Enphase), and the highest quality solar products.
What’s more, Solar Sam has expert solutions for residential, commercial, and agricultural applications. We’re here to help you with all your solar needs (and wants). We offer a full range of quality solar products, professional solar panel installation, and even solar panel cleaning (residential and commercial).
Visit our website for deals that are out of this world and give us a call at 833-RU-SOLAR (833-787-6527) to get started with a free quote. Solar Sam helps you power your life with green energy run by the sun!