The Investment Tax Credit (ITC) (the federal tax credit for going solar) is one of the major financial benefits of solar for homeowners and businesses. If your solar panels are installed and ‘placed in service’ before December 31, 2021, you will be able to claim a 26% Federal tax credit on your tax return in 2022. Please note that you must have a federal tax liability of at least your solar tax credit in 2021 in order to get the full amount, but if you don’t you can simply carry the balance forward to the following year. The federal tax credit for 2022 and 2023 is also 26%, but in 2024 it drops to 22% and is then set to drop to 0% starting 2025. We also recommend you consult with your tax preparer so that you understand exactly what you will be eligible for before moving forward with solar.
You are only eligible to claim the ITC if you are the owner of your solar system, which means you must either pay cash or finance your solar panels to claim it. If you take advantage of our Lease or Power Purchase Agreement (PPA) programs you do not own the solar panels, so you aren’t eligible for the tax credits. Our Lease and PPA options are still very worthwhile options however, depending on your personal circumstances. These options are very appealing to nonprofits, who do not wish to pay cash or carry a solar system loan on their books, as they can’t use the tax credit anyway. Businesses on the other hand are the biggest tax beneficiaries of the tax advantages to going solar before 2025. When a business goes solar (and they pay cash or finance their panels) they can claim the 26% Federal tax credit homeowners are allowed, they also get Federal and State depreciation on their solar asset to write off against their corporate profits.
Their corporate tax rate plays a huge part in calculating their Federal bonus depreciation and MACRS (state) depreciation amounts, so we advise you talk to your tax preparer to fully understand what tax credits you’ll be able to claim and when you’ll be able to claim them! Like homeowners, businesses must have a sufficient tax liability in order to claim all of their solar-related tax credits. If not, they can carry the balance of their solar tax credits forward to use against future year’s tax liabilities. Whether you are a homeowner, a Business or a Nonprofit, our Energy Experts will be able to answer your questions about anything solar related but will also be able to present your most likely tax credits of going solar. Our CPA partners are on hand to provide you more solid numbers on what to expect. Knowing what tax credits you can claim by switching to solar is very important for our Energy Experts to present the solar option that best suits your needs, so click below to get started and to go solar before the tax credits run out!