The Solar Investment Tax Credit (ITC) has been a huge reason many people have gone solar. A 26% rebate on a solar(formerly 30%) is only one of the great reasons so many people have gone solar today.
Extended renewable energy tax credits have been included in a $1.4 trillion federal spending package alongside a $900 billion COVID-19 virus relief spending bill. The solar investment tax credit (ITC), which was scheduled to drop from 26% to 22% in 2021, will stay at 26% for two more years.
This means that solar projects in all market segments — residential, commercial, industrial, utility-scale — that begin construction in 2021 and 2022 will still be able to receive a tax credit at 26%. All markets will drop to a 22% tax credit in 2023, and the residential market will drop to 0% while the commercial and utility markets will sit at a permanent 10% credit beginning in 2024.
What exactly is the solar investment tax credit? It is simple, the Solar Investment Tax Credit is a federal credit that allows you to deduct 26% of the cost of installing a solar system from your federal taxes period if you don't have the tax liability to use the entire credit, you can roll it over for 5 (five) subsequent years. The only catch is you have to purchase or finance the solar system, not utilize a solar lease or a power purchase agreement.
The Solar Investment Tax Credit was created in 2006 to help grow the new solar power industry. prior to 2006 solar was expensive to traditional sources of energy specifically fossil fuel. Solar was for the environmentalists, those that wanted to live off grid and away from government control, and other scenarios where solar would make sense even with a high price. Thankfully the growing public support for renewable fossil fuel alternatives and renewable energy the Federal Government created the Investment Tax Credit to help made solar more affordable and give solar the edge it needed to become a thriving industry. And it worked. Since the beginning, the investment tax credit helped the solar industry grow exponentially, year after year. Like State and Utility rebates that disappeared overtime , the ITC was also designed to scale down and eventually be illuminated completely. That time is over the next few years.
For us folks in the solar industry we have seen the threat of the Investment Tax Credit going away before . The original program was designed to expire in 2007 shortly after it was rolled out. Thanks to our friends in Congress, The Investment Tax Credit was saved by legislation in 2015. This applies to residential solar installation; Utility scale solar such as investor-owned utilities and commercial solar systems will be able get residential renewable energy credits beyond that time. Commercial projects can also get the federal Investment Tax Credit on solar PV systems such as geothermal heat pumps or other energy efficient installations, but rooftop solar systems and ground mount solar for home will not exist after 2021.