Could the Federal Solar Tax Credit Be Repealed?

A repeal of the solar tax credit would have a dramatic impact on the U.S. photovoltaic market.

In late 2015, the federal solar tax credit was extended, giving the renewable energy industry a much-needed boost. Originally set to expire at the end of 2016, the financial incentive was extended for five additional years.

Currently, the federal solar investment tax credit (ITC) is scheduled to be phased out gradually. As it stands now, the credit for installing a new residential photovoltaic system will be eliminated by 2022. Commercial installations will remain eligible for the ITC after 2022, but the credit will be reduced to 10 percent.

Solar Tax Credit Could Be in Jeopardy

Depending on the new U.S. presidential administration’s energy policies, however, the ITC could potentially be eliminated even sooner.

During the 2016 presidential campaign, the president-elect did not suggest that he was considering repealing the solar ITC. But it could happen. In 1986, the first U.S. tax incentive for photovoltaic installations was abolished to fund tax cuts under then-President Ronald Reagan.

Though it remains to be seen whether comprehensive tax reform will occur under President Donald Trump’s administration, financial experts recognize that a U.S. tax system overhaul is likely.

What Would the Solar Industry Look Like Without the Solar Tax Credit?

Under the current federal tax guidelines, the credit is projected to lead to more than 72 gigawatts (GW) of solar installations through 2020. And by then, 20 GW of photovoltaic capacity is expected to be installed every year.

If the ITC is eliminated, new photovoltaic installations could drop by half, according to Greentech Media (GTM) Research. Utility scale development could decrease by up to 70 percent.

Overall, GTM says that a repeal of the solar credit could threaten up to $30 billion in future photovoltaic investment.

Install Your Photovoltaic System Now to Claim the Federal Tax Credit

Scheduling your photovoltaic installation for 2017 is a wise move, as the solar tax credit may not be here to stay.

And even if Congress doesn’t eliminate the ITC, you must complete your photovoltaic installation by the end of 2019 to get the full 30 percent credit. Residential and commercial photovoltaic systems placed in service in 2020 only qualify for a 26 percent ITC, and those installed in 2021 can only claim 22 percent.

Intermountain Wind & Solar is one of the largest and most trusted photovoltaic contractors in the Intermountain West. Visit our website or give us a call today to schedule a consultation. Our expert team can answer all of your questions about photovoltaic energy and the federal solar tax credit.