Know Everything About Federal Solar Tax Credit 2018

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.