The Solar Investment Tax Credit: What You Need to Know
Under George Bush’s administration, the Energy Policy Act of 2005 enacted the Federal Solar Tax Credit or the Federal Investment Tax Credit (ITC) to support growth of renewable energy businesses. It’s proven to be an incredibly effective policy, as since the tax credit’s inception, the solar industry in the United States has grown by a whopping 10,000%, with an average annual growth of 50% over the previous ten years!
What Is the Solar Investment Tax Credit (ITC)?
Put simply, the ITC is a tax credit of 30%. To incentivize the use of solar energy, the ITC allows consumers and businesses to deduct a certain percentage of the cost of solar energy and installation against their taxes. Dollar-for-dollar, a tax credit reduces the amount an individual or business would otherwise owe the Federal Government in income taxes. Currently, the Investment Tax Credit is set at 30%.
For example, if you spend $9,000 on the qualifying purchase of solar panels, other solar energy equipment, and installation on your residence (Section 25D) or commercial (Section 48) property, you could claim $3,000 as a tax credit. That means, if you earned $20,000 in income, $3,000 would not be taxed. Plus, if your credit is greater than earned income, the ITC allows the remaining amount of the tax credit to be rolled over to the following tax year.
Take Advantage of the ITC Before It Expires
If you’ve been considering an investment in solar energy for your home or business and you’d also like to take advantage of the ITC, you need to act now. The ITC is set to expire, and is set up on a schedule to reduce the tax credit and eliminate it over the next few years, as follows:
- 30% tax credit for projects commenced in 2019
- 26% tax credit for projects commenced in 2020
In 2021, the residential tax credit drops to 0% and just 10% for commercial projects.
How to Qualify for 2019’s 30% Investment Tax Credit
If you don’t want to miss out on the potential personal or business tax savings of investing in a solar energy system this year, then you need to act quickly. In order for your tax credit application to qualify, you will need to sign a contract on a system by October 2019 and construction on your new solar energy system must commence before the end of the year.
Get a Free Quote from STI Solar, Roofing & Air Conditioning
With long days year round, the sun is always shining on Kauai and Oahu. Don’t miss out on your chance to save both on energy costs and your 2019 income taxes by purchasing a system before October. For a free estimate and advice on the best system for your property, contact STI Solar, Roofing & Air Conditioning today.