Solar tax
credits or investment tax credits (ITC) allow you to reduce 30 percent of the
price of solar energy system installation from your federal taxes. This
incentive applies to both commercial and residential systems. You can take the
credit in the initial year or anywhere in between of your five years.
How Tax Credit Extension Benefits
Solar Industry?
Federal ITC
was initially set up by Energy Policy Act of 2005 and was set to expire at the
end of the year 2007. Series of extensions drove expiry date to the end of
2016, but the professionals believe that five-year extension would bring
tremendous benefit to the solar industry. The growing popularity of effective solar energy solutions is creating a
better renewable energy economy in the USA. Furthermore, with the help of ITC
and other state-specific rebates, solar farms have become a profitable business
for the developers. Now, this incentive is available to the homeowners in some
form through the year 2021 with no cap.
2016 to 2019: The solar tax credit stays at 30
percent of the system cost.
2020: The homeowners of the newly built
commercial and residential solar can reduce 26 percent of the price from their
taxes.
2021: Residential and commercial solar
building owners can lower 22 percent of the system cost via their taxes
2022 Onwards: Commercial solar energy systems
owner can minimize 10 percent of the system cost via taxes. Also, there is no
federal incentive for the residential solar systems.
How Does it Work?
As long as
you are using solar energy system, you are eligible for the solar tax credit.
Even if you do not possess sufficient liability to claim it in one year, you
can roll over your left credits in your near future as long as there is
validity. Just note that if you sign a Power Purchase Agreement (PPA) with your
solar energy consulting firms, you
will not receive any incentive.
Claiming Investment Tax Credit for
Solar Power
Claiming
process of solar incentive comes down between system owner and their respective
tax person. There are no vital steps to claim it. But if you are applying for
the state-specific rebates or tax incentive, then you will need to do the
paperwork as per the rules of your state.
