Switching to solar provides a whole host of benefits, from helping you save money on your electric bill, to being kind to the environment by treading lightly on the planet with a much smaller carbon footprint, but if you need one more reason to flip the switch to solar, look no further than the solar tax credit, otherwise known as the Investment Tax Credit (ITC).
The ITC was established by the Environmental Protection Agency in 2005 as a way to encourage American taxpayers to embrace solar power by offering tax incentives when you install a solar energy system on your home or business.
The ITC is a dollar-for-dollar reduction in the income taxes you owe. If you owed $7,000 in taxes but received a $2,000 tax credit, for instance, the amount of taxes you’d be required to pay would be reduced to $5,000. In the case of the solar ITC, the amount of the credit is directly related to the amount invested in the solar power installation, currently 26% of the solar property.
The government implemented the ITC over a decade ago and originally intended for it to last two years. Its success led to multiple extensions, and has been instrumental in the growing popularity of solar power over the past several years.
Until the end of 2020, you can receive the ITC at 26%. However, that percentage will drop to 22% in 2021. In 2022 and beyond, only commercial businesses will be eligible for the ITC and even then, it will only be 10%.
There are conditions that must be met in order to be eligible to receive an ITC for solar systems.
Assuming you meet the requirements for the ITC, you will need to file a claim (IRS Form 5695) when you file your annual tax return. Be sure to gather all expense receipts related to the solar installation to submit with your taxes or to give to your tax preparer.
The 26% tax credit is available until the end of 2020! If you are considering installing a solar energy system installation to take advantage of the credit, please keep these things in mind:
The solar tax credit offers homeowners a less expensive option day 1, due to government funding paying for a huge portion of your solar system. Talk to one of our Solar Experts to receive your no obligation home assessment to find out exactly how much you can save.