Solar Federal Investment Tax Credit Extended
Congress has passed a bill that extends the 30 percent federal tax credit for residential and commercial solar projects through 2019. This is big news for the solar industry. The investment tax credit (ITC) was originally set to expire at the end of 2016. This means homeowners and businesses can still take advantage of the 30 percent tax credit on the cost of their solar panel system for several more years. The average Grid City Electric customer saves nearly $9,000 on the cost of going solar. In 2020, the ITC lowers to 26 percent, 22 percent in 2021, and then it drops to 10 percent in 2022.
Financial Background on the Solar Federal Tax Credit
Solar panels utilize various tax incentive based tax laws in place such as ITC. This tax credit allows a tax payer to claim 30 percent of “qualified expenditures,” solar panels being one of them on a home or dwelling unit used a residence by the tax payer. The law continues to explain that if a homeowner’s federal tax credit “exceeds tax liability,” they must carry the excess forward to the “succeeding taxable year.”
Let us break this down. The government will allow you to get a 30 percent dollar for dollar tax credit on your tax return. The tax credit can only be claimed in the year in which the solar energy system is interconnected. A system installed and interconnected in 2016 is eligible for tax credits on the homeowner’s 2016 tax return.
Installed and interconnected needs to be distinguished. Interconnected means there is an official document from the utility specifically stating an interconnection date. Paying for the solar power system in full before it is installed, or having the system installed without official interconnection does not legally allow a homeowner to claim the tax credit. Not to worry if you missed the cutoff date; the law allows credits to be received in the succeeding taxable year up until 2019 at 30 percent to be reduced annually and phased out completely by 2021 (residential).
Example of Solar Investment Tax Credit Application
Gross System Cost: $30,000
Solar Investment Tax Credit: $30,000 x 30% = $9,000
Local New York State Solar Tax Credit: $30,000 x 25% = $7,500 – Maximum NY Tax Credit = $5,000*
Total Tax Credits: $9,000+$5,000 = $14,000
*New York State Tax Credit Applies Only to Long Island, New York City and the Greater New York areas.
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What You’ll Get
- Going solar will give you a lower electric bill
- A Cash free investment with low interest financing
- Insulation from rising energy costs
- Hassle Free experience taking care of all the paperwork and utility interconnection