Every few years, the federal government has the opportunity to renew the 26% Solar Investment Tax Credit (ITC) through a two-year extension. Luckily, they renewed the Solar ITC for 2021 and 2022. Let’s look at what this means for solar installations over the next year.
The Solar ITC allows businesses to deduct 26% of their solar installation costs from their federal taxes. It is part of the Energy Policy Act of 2005, and it was originally set to expire at the end of 2007. However, the federal government has renewed it every time it was set to expire since the original 2007 expiration date. When the government renews the ITC, the credit stays at 26% for another two years. If the ITC ever expires, its percentage falls to 22% after the expiration. Every year after that first post-expiration year, the percentage falls an additional 10%.
Why does the ITC matter? It matters because it allows solar projects that begin construction in 2021 to deduct 26% of installation costs from their federal taxes. That deduction greatly reduces the amount of money you pay toward your solar energy system and enables you to pay off your system quickly.
The ITC applies to all the major solar installation categories: commercial, utility-scale, industrial, and residential. If you want to apply for the ITC in 2021, you need to meet the following requirements:
- You must start construction on and install the solar panel system during a year that the ITC is active.
- Your system must be located in the U.S.
- You must be the system’s owner.
- You must have paid for the system with cash or through solar financing programs.
- Your solar system must not have been used before its current installation.
If you meet all these requirements, you can apply for the ITC and receive your 26% tax credit.
A solar panel installation allows you to reap the benefits of renewable energy from the environment and reduce your facility’s dependence on fossil fuels. Solar energy technologies have grown more efficient and affordable over the past decade, making 2021 a great time to invest in solar energy for your business or organization. The ITC’s two-year extension gives you the opportunity to purchase your solar system directly and offset the costs with this tax credit.
When the federal government enacted the Energy Policy Act of 2005, they set the tax credit percentage at 30%, and it stayed at that level with every renewal through 2019. Then, the previous presidential administration set it at 26%. Since a new presidential administration that supports more progressive policies has taken office, the ITC could change over the next few years. You can invest in a solar installation now and take advantage of the 26% ITC, or you can watch how the new administration chooses to support the solar industry. Their policies may create new solar tax incentives and financing programs.
Verogy offers a range of financing options, including tax credits and incentives. We have helped many previous clients access the Solar ITC in the past, and we have the resources and expertise to do the same for you. We help you explore your financial options during your project’s development stage. Our services ensure you have the right financing for your solar system and your overall budget.
If you’re ready to invest in a solar energy system and you want to offset your costs with tax credits, reach out to Verogy today. We put our financing resources toward getting the right tax credits and incentives for your solar panel system. We help you leverage both federal and state tax incentives and tax credit programs to reduce your installation costs. Let us use our industry knowledge and expertise to make your solar system a financial reality. Then you can power your facility, campus, or community with renewable energy.