How Does the Solar Investment Tax Credit Work?
The Investment Tax Credit (ITC) is a federal tax credit claimed against the tax liability of residential (under Section 25D) and commercial and utility (under Section 48) investors in solar energy property. The Section 25D residential ITC allows the homeowner to apply the credit to his or her personal income taxes. This credit is used when homeowners purchase solar power systems and have them installed on their homes. In the case of the Section 48 credit, the business that installs, develops and/or finances the project claims the credit.
A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company would otherwise pay the federal government. The ITC is based on the amount of investment in solar property. Both the residential and commercial ITC are equal to a percent of the basis that is invested in eligible solar property which has begun construction through 2020. The ITC then steps down according to the following schedule:
- 26 percent for projects that begin construction in 2020-2022
- 22 percent for projects that begin construction in 2023
- In 2024 the residential credit drops to zero while the commercial credit drops to a permanent 10 percent
The solar panel cost is lower than ever before, but the Solar Investment Tax Credits is going away. Talk to us for a Free No Obligation Quote today.