BLOG
search

What's Going on With The Federal ITC?

Jessica PirroJuly 26, 20192760

With the cost of solar panels declining, a question that is often asked is whether or not one should wait to get a solar panel installation. The answer to that question in 2019, is you should get a solar panel installation as soon as possible: given that the looming step-down and the expiration of the 30% federal investment tax credit (ITC), solar shoppers who wait until 2020 or later to move forward will be missing out on the major solar energy tax benefits, but just how much?

In this article we will discuss the federal tax credit, the timeline for the step-down as well as provide some tips for homeowners who are looking to take advantage of the 30 percent solar energy tax benefits before the end of the year.

What Exactly is the Federal ITC?

The federal investment tax credit, which is often referred to as the solar tax credit, allows you to deduct 30 percent of the cost of your solar panel installation from your federal taxes. This solar incentive is a tax credit rather than a deduction, you will need to have sufficient tax liability to be able to take advantage of this solar incentive. However, if you aren’t able to use your entire federal investment tax credit in the first year, you will be able to use the remaining credits over into future years.

The ITC is only available to those who are going to purchase their solar-powered systems: property owners who sign a solar panel lease or power purchase agreement will not be eligible for the solar energy tax benefit because the owner of the system will claim the solar energy tax benefits for themselves.

The Federal ITC Step-Down Timeline

The federal ITC was supposed to end in 2016. But in late 2015, Congress passed a spending bill that included an extension of this solar energy tax benefit. The bill states that the solar energy tax credit will be available to homeowners until 2021, but it comes with an important distinction: the 30 percent tax credit that will lower the cost of solar panels only lasts from 2016 to 2019. Starting January 1, 2020, the solar energy tax benefit value drops to 26 percent, before dropping to 22 percent in 2021. At the start of 2022, the cost of a solar panel installation will go up because of the solar energy tax benefit to expire.

Here is what the solar energy tax benefit will look like in the next four years. In 2019, the solar energy tax credit is 30 percent of the cost of solar panels. 2020, the tax credit is 26 percent of the cost of the solar-powered systems. In the year 2021, the solar energy tax benefit will be 22 percent of the cost of the panel installation. In 2022, the solar energy tax benefit will no longer be available.

When it comes to commercial solar panel installations, the commercial solar energy tax benefit is the same as the residential solar panel installation solar energy tax benefits up until the end of 2021. While the solar energy tax credit ends for homeowners on January 1, 2022, the commercial solar energy tax credit will reduce to remain at 10 percent moving forward.

The ITC savings: 2019 vs 2020

Sure a 4 percent decrease may not seem like that much, but it can come out to thousands of dollars in savings when you are buying solar-powered systems.

Here are a few examples of the difference in savings from 2019 to 2020. The data that was used was an average cost date from 2019. An estimated cost for 6 kilowatt (kW) and 10 kW solar-powered systems in various states. Values have been rounded to the nearest dollar.

ITC Savings 2019 - 2020: 6kW

State

Average Cost of Solar

Gross Cost For a 6 kW System

2019 Tax Credit Value

2020 Tax Credit Value

Difference

California

$2.96

$ 17,760

$5,328

$4,618

$710

Florida

$2.63

$15,780

$4,734

$4,103

$631

Illinois

$3.25

$19,500

$5,850

$5,070

$780

Massachusetts

$3.16

$18,960

$5,688

$4,929

$758

Texas

$3.85

$17,100

$5,130

$4,446

$684

Utah

$3.06

$18,360

$5,508

$4,774

$735

ITC Savings 2019 - 2020: 10 kW   

State

Average Cost of Solar

Gross Cost For a 6 kW System

2019 Tax Credit Value

2020 Tax Credit Value

Difference

California

$2.96

$29,600

$8,800

$7,696

$1,184

Florida

$2.63

$26,300

$7,890

$6,838

$1,052

Illinois

$3.25

$32,500

$9,750

$8,450

$1,300

Massachusetts

$3.16

$31,600

$9,480

$8,216

$1,264

Texas

$2.85

$28,500

$8,550

$7,410

$1,140

Utah

$3.06

$30,600

$9,180

$7,956

$1,224

Depending on the solar-powered systems will depend on the savings from 2019 to 2020 may be less than $1,000. But, the bigger the solar-powered systems are, the higher the cost of solar panels in the area, the more you stand to lose from the ITC step-down.

Make Sure You’re Eligible For the 30 Percent Solar Energy Tax Credit

If you want to take advantage of this solar incentive you are going to claim this 30 percent federal ITC; these are some guidelines to follow to maximize the ITC benefit.

Start Shopping for Solar Now!

Solar panel installation is a big decision. The sooner you begin start shopping, the more time you are going to have to evaluate the solar panels and the equipment that comes with solar-powered systems, the solar incentives that will help with financing, and the solar panel installation company options.

Figure Out the Timelines

Not all solar companies are going to be able to get a solar panel installation done on the same timeline; their timeline varies depending on how many projects are already scheduled, as well as how many solar panel installation crews each company has. Before you sign a contract, find out each company how soon they will be able to finish your solar panel installation.

Start Payments Before the Year Ends

Due to the commence construction guidance that has been outlined by the IRS, you don’t have to worry about having your solar-powered systems being fully operational before the end of the year to claim the 30 percent solar energy tax benefit, you just need to start the solar panel installation before the year ends.

Solar system price checker

Comments

Design Your Solar Home

START

12 3

Input your address to see if it is solar friendly and how much you can save with solar.

Great. Your address is perfect for solar. Solar incentive is still available. Select monthly utility cost and calculate the size of solar system you will need now.

Whoa ! Going solar is definitely a smart decision.

kw System size years Payback period Lifetime savings

No money down, 100% finance is available.

Sign Up Today to Take Advantage of the Solar ITC!

Do not show this information again.