Solar Investment Tax Credit: Basics and Eligibility
Solar power installation comes with numerous benefits for both property owners and the environment alike, from eco-friendly areas to convenience and, perhaps most importantly for many, a major positive impact on your bank account. One of several areas where this impact is often felt: Tax credits for solar power and related forms of energy storage.
At Intermountain Wind & Solar, we’re proud to offer both commercial and residential solar power installations and related services, utilizing the Tesla Powerwall system for solar power storage. One of these related services involves helping our clients realize the numerous financial benefits potentially available to them with a solar installation or upgrade, including tax credits. This two-part blog series will go over everything you need to know here.
Investment Tax Credit
The primary tax credit you’ll see referred to with regard to solar power is known as the investment tax credit (ITC), or the federal solar tax credit. Originally established back in 2005 as solar was first becoming more robust, its popularity caused it to be extended past the original planned end date of 2007, and it still exists today.
The ITC allows owners of a solar energy system to deduct 26% of the cost of this system from their federal taxes, with no cap whatsoever on the value of the solar energy system itself. It can also often be applied to the cost of installing a battery along with your system, such as the Tesla Powerwall. While you’ll need to consult your tax professional for a precise estimate of how much you’ll be able to save here, solar power owners find incredible savings through this method.
For both residential and commercial credits under the ITC, the primary requirement at play is ownership of the solar energy system – there are other potential tax credits for those who lease their systems instead, but the ITC is not one of them. Battery eligibility, on the other hand, is a bit more complex: As long as it’s charged by renewable energy it can be included in the credit, but if it’s powered by grid electricity instead, it will not qualify.
The vast majority of batteries installed along with solar systems will be charged by the renewable energy system, so this isn’t much of an issue usually. But some own a battery just to charge it with electricity from the grid, in which case you will not qualify.
For commercial facilities, battery restrictions are slightly more relaxed. Specifically, you’ll still be eligible for an ITC credit if the battery is charged from a renewable energy source at least 75% of the time, rather than all the time for residential areas – and the exact value of your battery credit will depend on what percentage of the time it’s being charged by renewable sources versus the electrical grid. To get full value, you’ll need to have the battery charging renewably 100% of the time.
For more on the investment tax credit for solar systems, or to learn about any of our solar panel services, speak to the staff at Intermountain Wind & Solar today.