Given that many of the big state incentives have come to the end of their lifespans (the California Solar Initiative is no longer taking new applications), the investment tax credit (ITC) may be the last big solar subsidy for most California homeowners.
If you have been considering a solar system, now is your chance to make a move or miss out on sizeable savings.
What is the Solar Investment Tax Credit (ITC)?
The solar Investment Tax Credit (ITC) was created in 2006 to help the solar industry grow. Any transition to a new technology is expensive in the beginning, and solar was no different. Growing public support for renewable energy encouraged Congress to create a solar investment tax credit to help the industry gain a foothold so that technologies could improve and an economy of scale develop.
Since its inception, the ITC has helped solar grow by more than 1,600 percent. It has spurred the renewable energy industry boom, driving competition and innovation and reducing costs and carbon emissions — a win for everybody.
The ITC allows you to deduct 30 percent of the cost of installing a solar energy system from your federal taxes. Don’t have the tax liability to use your entire credit? You can roll it over to subsequent years. The only catch is that when using a lease or power purchase agreement (PPA), you do not receive the rebate, the lease or PPA company does — but the savings are usually folded into a lower monthly payment for you.
The solar ITC was never meant to be permanent. In fact, it was supposed to have reached its end twice already, but was extended. The current ITC is scheduled to ramp down over the next few years and reach its end in 2021. We consider ourselves fortunate that the ITC even survived this political climate at all, and experts agree that it is unlikely to be renewed again.
2021 may seem like plenty of time to put off this decision, but it’s not. The ITC is free money from the IRS to support doing something that already makes economic sense. The longer you wait, the smaller the tax credit, and the more money you will have thrown away in electrical bills.2018 – 2019: The tax credit remains at 30 percent of the cost of the system. This means that for the next year, you can still get a major discounted price for your solar panel system. 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes. 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes. 2022 onwards: There is no federal credit for residential solar energy systems.
Are You A Solar Holdout?Many businesses and homeowners haven’t felt a sense of urgency when it comes to solar. It’s easy to be patient when you’re already connected to the grid, letting this whole solar thing figure itself out while you wait for the best deal.
If that’s you, and you’ve simply been putting off solar until the time is right, let me tell you — the time is right. The industry prices are stable (for the moment), you’ll receive a 30 percent tax credit, and California has made solar panels on new homes mandatory.
Talk to the solar experts at Mr. Roofing to get a free, in-person evaluation and we can show you how much you’ll save when you switch to solar.