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.