Editor Note: As of Aug. 16, 2022, the solar tax credit (or Investment Tax Credit, ITC) has increased to 30%. To read more and get details on further incentive updates, see our Guide to the 30% Solar Tax Credit.
2022 is the last year residents can take advantage of the 26% federal solar tax credit (also known as the Investment Tax Credit, or ITC) and save huge on their solar panel installation.
The solar tax credit (ITC) is a fantastic opportunity for people interested in solar energy to install solar panels and get money back in the form of a tax credit on their annual taxes.
However, the solar tax credit is set to decrease and expire in the next couple of years. Here are the details you need to know to get your solar tax credit before it expires.
WHAT IS THE SOLAR TAX CREDIT (ITC)
The federal solar tax credit is a dollar-for-dollar reduction of your federal income tax. This means that homeowners and businesses can deduct the full amount of their solar installation, including parts and labor, from the amount they owe to the federal government in income taxes.
If your solar tax credit is larger than the amount you owe in federal income taxes, you can carry over your tax credit to following years.
SOLAR TAX CREDIT EXTENDED IN 2021
In a last-minute decision in 2021, Congress passed a $1.4 trillion spending package that included an extension of the 26% federal solar tax credit.
The solar tax credit will now remain at 26% until 2023, when it will decrease to 22%. The solar tax credit will expire for residential installs in 2024, but will remain indefinitely at 10% for commercial installs.
HOW DO YOU LOCK IN YOUR 26% SOLAR TAX CREDIT?
For residential customers to lock in their 26% federal tax credit, construction must begin on their solar installation before Dec. 31, 2022. This allows the homeowner to claim the solar tax credit for that year, even if the solar panels are not producing energy until 2023.
For commercial solar projects, a businesses could pay a minimum of 5% of their projected solar installation costs. This “safe harbor” payment would lock in their 26% solar tax credit, even if construction does not begin until 2023.
LEARN MORE ABOUT SOLAR TAX CREDITS
To learn more about the federal solar tax credit, and to get a free solar analysis, contact Green Ridge Solar today. Our solar experts can provide you with all the details about how the solar tax credit works, how you can lock in your rate, and how much you can expect to save as a result.
If you would like to read the legislation regarding the solar tax credit extension, the document can be found here. Skip to page 2439 for the commercial solar tax credit, and page 2448 for the residential solar tax credit.
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