[Solar] Investment Tax Credit

Updated: Mar 2, 2021

What Is the Federal Investment Tax Credit?

The US [solar] Investment Tax Credit (ITC Video) commonly known as the Federal Tax Credit was originally established by the Energy Policy Act of 2005 and was set to expire at the tip of 2007. A series of extensions pushed the expiration start to the tip of 2016, however the industry believed that an extra five-year extension would bring the solar trade to its full maturity. Due to the defrayal bill that Congress passed in late 2015, the decrease is currently out there to homeowners in some kind through 2021. The 2020 26% tax credit was miraculously extended until 2022, and scheduled to decrease to 22% by 2023, allowing the industry to expand it's growth trend for at least another 3 years—if Congress doesn't approve another extension.

IRS Rules for the Solar Investment Tax Credit

The rules for residential solar fall under Internal Revenue Code Section §25D.

Under this code section, the law mandates that the solar system must be owned and turned on (placed in-service) in the tax year in which the Federal tax credit is claimed.

Additionally, eligible prices that qualify for the Federal investment decrease embrace the instrumentation directly associated with the solar system like the panels, racking, inverters, monitors, attached home battery system, etc. The eligible price can even embrace any direct work site preparation like little repairs to the roof surface or a tree removal for sun improvement. Further, it's vital to notice that current system homeowners could expand their current systems put in in previous years.

What's NOT eligible is the following: For example, if a home-owner includes new insulation to the domicile or switches to LED bulbs around the house to improve efficiency, this stuff is NOT eligible for the Federal investment reduction. Also not eligible are stand alone thermostats, insulation, energy efficiency windows, roof repair, HVAC upgrades, stand alone chargers or crawl space sealing.

A responsible solar provider will make sure their customers agree to install only after understanding all which is covered under the (ITC) Solar Investment Tax Credit, so they don't fall prey to unscrupulous and irresponsible companies. If you have doubts, please consult a tax advisor specializing on renewable energy.

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