The federal solar tax credit is by far the most lucrative financial incentive for making the switch to photovoltaic power. The savings are substantial — homeowners and businesses can reduce their income tax liability by 30 percent of their PV system and installation costs.
However, the solar investment tax credit (ITC) isn’t going to be around forever. That’s why it is important for potential solar adopters to learn more about when it expires and what any changes to the program could mean for your photovoltaic installation.
Federal Solar ITC Phasedown Plan
As it stands, the solar tax credit will continue to offer 30 percent savings until the end of 2019. For residential and commercial photovoltaic systems put in service after that, the credit amount won’t be quite as generous.
Solar installations completed in 2020 will be eligible for a 26 percent credit, and PV systems that become operational in 2021 will qualify for 22 percent.
After 2021, the ITC is slated to expire for homeowners.
This means that any residential PV system placed in service Jan. 1, 2022, or later won’t benefit from the federal tax credit. Commercial photovoltaic systems can still claim the ITC, but it will only be 10 percent.
Putting the Numbers in Perspective
With a little math, we can demonstrate the effect of the changes in the solar ITC.
Let’s say a PV system comes in at a net price of $30,000. With the full 30 percent ITC, the credit would be a rather impressive $9,000.
Now, imagine that same PV system installed in 2020. The tax credit has dropped to 26 percent, so the tax liability reduction would be $7,800.
If the solar PV system isn’t placed into service until 2021, when the credit drops to 22 percent, the ITC will be worth just $6,600.
After the end of 2021, the federal solar ITC for a $30,000 commercial photovoltaic installation will drop to only $3,000. And forget about a credit for a residential PV system — that financial incentive will be gone.
Schedule Your PV System Installation Now
If you want to make sure you don’t miss out on the federal solar tax credit, you need to schedule your photovoltaic installation soon.
As the solar ITC nears its expiration date, homeowners and businesses will be in a hurry to get their projects completed in time — and that will keep professional photovoltaic contractors busy. Plan your PV installation now, and you won’t have to worry about tight schedules and longer project timelines.
Remember, there is no guarantee that the solar ITC phasedown plan won’t change. The government is already planning a tax system overhaul. This makes the future of the ITC uncertain.
Now is definitely the right time to start planning your switch to photovoltaic power.
Intermountain Wind & Solar, the region’s preferred residential and commercial solar contractor, offers free consultations to homeowners and businesses throughout Utah, Nevada, Idaho, Wyoming and Colorado. Contact us today to learn more about claiming the federal solar tax credit for your PV system.