Congress gave homeowners a tremendous gift by extending the solar panel tax credit program for five additional years. This will make solar energy more affordable for all Americans. How does this impact you as a homeowner?
What is the solar tax credit?
The investment tax credit (ITC) allows you to deduct 30 percent of your solar energy system cost from your federal taxes. Thanks to the investment tax credit, the average homeowner has saved nearly $9,000 by switching to solar. The additional cost benefit for switching to solar energy is you can save up to 70% off your energy bill.
What does the federal solar tax credit extension mean for the solar industry?
The Energy Policy Act of 2005 and was set to expire at the end of 2007. A series of extensions pushed the expiration date back to the end of 2016. Experts believed that an additional five-year extension would bring the solar industry to its full maturity. Thanks to that extension the tax credit is now available to homeowners through 2021. Here are the specifics:
- 2016 – 2019: The tax credit remains at 30 percent of the cost of the system.
- 2020: Owners of new residential and commercial solar can deduct 26 percent of the system cost from their taxes.
- 2021: Owners of new residential and commercial solar can deduct 22 percent of the system cost from their taxes. The solar energy system must be operational by December 31, 2023, to claim the credit.
- 2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the system cost from their taxes. There is no federal credit for residential solar energy systems.
Do I qualify for the solar panel tax credit?
If you are a homeowner and own your solar energy system, you are eligible for the solar tax credit. Signing a lease or PPA with a solar energy system installer disqualifies you from receiving the tax credit.
More resources on the extension of the federal ITC
- The Wall Street Journal explores the legislation and what it means for today’s homeowners.
- Read the language of the official bill (Section 303, beginning on pg. 2005, details the specifics of the extension).