When Will the Solar Tax Credit Expire?

The Solar Investment Tax Credit (ITC), enacted in 2006, is easily one of the most important federal policies instituted in the last several decades. 

Designed to support and encourage solar growth throughout the U.S., the solar ITC has generated 10,000% growth in the U.S. solar industry. In addition to promoting solar power for homes and businesses throughout the U.S., the ITC has created thousands of jobs, pumped billions into the U.S. economy, and raised awareness about solar energy across the world.

Despite the wild popularity of ITC, it has a built-in end date. Although lawmakers extended the program in 2015, the end is in sight. In fact, the value of the credit will begin decreasing at the end of 2019. 

The Solar Tax Credit Extension

Back in 2006, when the ITC passed, it was set to last until  December 31, 2016. In 2015, however, the U.S. Congress agreed on a bill that extended the ITC for five additional years, as one segment of a $1.15 trillion spending bill. Here are the critical details of the solar ITC extension:

• 30% for project that begin construction in 2019
• 26% for projects that begin construction in 2020
• 22% for projects that begin construction in 2021
• After 2021, the residential credit drops to zero while the commercial credit drops to a permanent 10 percent

What you Need to Know About the Solar Tax Credit Expiration 

Businesses or homeowners who invest in qualified solar properties in 2019 will receive an Investment Tax Credit equal to 30% of the cost.  The customer can lock in an ITC at the 30% level as long as they are under contract and have expended at least 5% of the contract amount during the 2019 calendar year. 

The same is true in 2020 for the 26% ITC and 2021 for 22%. Commercial customers starting their projects in 2022 and beyond will receive a 10% Investment Tax Credit while residential customers will no longer be eligible for a tax credit at all. 

Residential and Commercial Requirements to Claim the ITC

Wondering how you can take advantage of the ITC? Here’s an outline of the requirements for both commercial and residential projects:

Residential Requirements

• Any solar PV system must provide energy for your home. Furthermore, the system must be approved and in operational condition.
• The system must meet all applicable electrical and fire code requirements
• Your system must be operational after January 1st, 2006, or before December 31, 2021. 
• You must own the PV system, regardless of whether you purchased it in cash or with a loan.. If your system is financed using a lease or Power Purchase Agreement (PPA), it is owned by a 3^rd party. Homeowners and business owners do not qualify for the ITC if they are not the legal owner of the equipment. 

Commercial Requirements

• Your solar equipment must be brand new, not used
• Your system must be in service after January 1st, 2006 and on or before December 31, 2021
• Your solar energy system must be owned by U.S. tax paying entities
• Your solar system must be located within the U.S

Now is the Best Time to Take Advantage of the ITC

The ITC is a valuable program, but it’s quickly coming to an end. If you have yet to go solar, now is the perfect time to do it. To learn more about the ITC or how you can claim your tax credit, contact Sandbar Solar today!