The Future of the Federal Solar Tax Credit
October 22 2020
The federal solar tax credit is a huge financial help when it comes to going green. This incentive has made it possible for thousands of Americans to switch to solar since 2005.
Though the solar ITC, or investment tax credit, was originally set to end in 2007, it has been extended multiple times. Unfortunately, all good things must come to an end eventually.
It’s no secret that everyone is looking forward to the end of this year. After all, 2020 has been a rough one. However, before you throw in the towel, consider switching to solar by the end of the year so you can take advantage of the solar credit 2020 incentive.
Greenlife Solar is here to help you find the information you need to get started. Learn more about the federal solar tax credit. Then, use our comparison tool to find affordable solar for your home. Here’s everything you need to know about the future of the solar panel tax credit.
What is the Federal Solar Tax Credit?
The federal solar tax credit is an incentive from the federal government that is intended to promote the use of solar energy nationwide.
The solar credit 2020 has quite a bit of history. When solar panels first hit the market in the late 20th century, they were largely unaffordable for homeowners and small businesses. Some corporations took advantage of solar savings, but residential solar was nowhere to be found.
Then, the Energy Policy Act of 2005 entered the scene. This federal law changed the US energy policy by providing a number of tax incentives for various energy production methods. Though set to expire in 2007, it was extended and modified multiple times.
The solar portion of this act became the solar ITC, or “investment tax credit”. This credit covers a percentage of solar installation costs for commercial and residential buildings. Over time, as more people have made the switch, solar has become more affordable. As a result, the solar panel tax credit has reduced over time.
How Much Does the Federal Solar Tax Credit 2020 Cover?
The federal solar tax credit covered 30% of solar installation costs until 2019. Then, in 2020, that percentage dropped to 26%. Now, the federal solar tax credit 2020 is set to drop again to 22% in 2021.
This article is being written in October of 2020. Currently, you can save 26% on your home solar installation with the solar panel tax credit. In just over two months, though, you’ll lose 4% of your savings.
While that may not seem like much, keep in mind that solar is expensive. According to SEIA, the average American solar system size is 5kW. Before any tax credits, a typical 5kW system costs $14,800. The current federal solar tax credit 2020 brings that price down to $10,952.
That’s a savings of $3,848. However, if you bought that same system next year in 2021, your savings would drop to $3,256. Plus, here’s the real kicker: After 2021 there will be no federal ITC for residential systems. Instead, the ITC will become a commercial credit only. So, if you buy that same system in 2022, you’ll have to pay the full $14,800.
The solar panel tax credit isn’t just a matter of pocket change. We’re talking about thousands of dollars in savings. Your money goes further thanks to the solar panel tax credit 2020. Plus, a solar system will last you 20-25 years, so you have plenty of time to make back your initial investment through savings.
It’s definitely worth considering moving up your plans to go green in order to take advantage of the federal solar tax credit 2020.
How to Use the Solar ITC by the End of 2020
So, you have just over two months to take advantage of the solar panel tax credit 2020. After that, you’ll have one year until the federal ITC disappears for good (as far as residential systems are concerned).
To take advantage, you’ll need to make sure you’re eligible for the solar credit 2020. This is pretty easy to do: as long as you own the system, you’re eligible. This holds true even if you don’t have enough tax liability to claim the whole credit in one year. If that is the case, you’re allowed to roll over the credit, but only for as long as the federal ITC is in effect.
Also, keep in mind that you are not eligible for the tax credit if you sign a lease or PPA with a solar installer. In these cases, you are not the owner of the system, and therefore do not qualify for the federal ITC.
Once you have all the boxes checked, you’ll need to actually claim the credit. To do this, simply complete IRS Form 5695 when filing your yearly federal tax return. A tax expert or accountant will be able to help you with this. If you file taxes on your own, EnergySage has a great guide you can use to file for the solar panel tax credit 2020.
Find a Solar Installer
If you’re ready to go green without breaking the bank, find a solar installer with Greenlife Solar today. Simply let us know your address, utility provider, and average energy bill, and we’ll match you with solar installation companies in your area that can help.
Receive free quotes from each installer to compare your options. We only work with high-quality installers across the country, so rest assured that any company you review is trustworthy and reliable. They’ll also be able to help make sure you have everything you need to file for solar credit 2020.
Take advantage of the federal solar tax credit 2020 today. Find an installer with Greenlife Solar.
