With the federal solar tax credit set to expire at the end of 2016, the future of residential solar power was less than clear.
Fortunately, the outlook is much clearer today, as Congress recently approved an extension of this key financial incentive.
The solar tax credit, officially known as the investment tax credit (ITC), originally offered a 30 percent federal income tax liability reduction for photovoltaic system and installation costs.
Under the extension, homeowners are still eligible for the full 30 percent, but only until the end of 2019.
After that, the five-year plan steps down the amount of ITC that can be claimed.
Homeowners who install PV systems in 2020 can claim a 26 percent credit, while those who have systems placed in service in 2021 will be eligible for a 22 percent credit. As the policy currently stands, the credit for residential solar systems will be eliminated in 2022.
The federal ITC for residential and commercial solar systems was implemented in 2006, and since that time, annual solar installations in the United States have grown by more than 1,600 percent.
This astounding growth shows that the ITC has been instrumental in supporting solar energy expansion.
And with the extension, continued enormous growth is expected. According to solar industry estimates, by 2022, photovoltaic installations will generate enough electricity to power 19 million U.S. homes.
Another benefit of the ITC is that it has led to an incredible number of new jobs. Employment in the solar sector has grown by 86 percent, just over the last four years.
But, most important of all, consumer cost for solar installations has fallen significantly. Because the ITC is available to homeowners, solar companies have the market certainty they need to develop new technologies that drive competition and lower costs.
Industry experts agree that prices for solar technology are not likely to decline much further. Even if prices do go down slightly for equipment, that cost savings won’t compare to the amount you will have saved on electric bills in the meantime.
And investing now means that you can take advantage of the full solar tax credit.
To put this in perspective, consider a system that costs $25,000. If you install it now, you can claim 30 percent, or $7,500. That same system, placed in service in 2020, would only be eligible for $6,500, and if you delay until 2021, that number will drop to just $5,500. So, while you could save a few pennies on the dollar for photovoltaic panels by waiting, you may end up losing out in the long run.
Intermountain Wind & Solar is committed to helping our customers save big money on power bills. We also understand the importance of establishing energy independence and minimizing — or eliminating — the ongoing rate hikes imposed by greedy, for-profit utility companies.
Contact us today for more information about how you can use the federal solar tax credit to reduce your installation costs.
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