Since it was first enacted in 2006, the Solar Investment Tax Credit (ITC) has grown solar energy use by 52% a year. That’s a staggering 10,000% increase in the industry overall, which has created hundreds of thousands of jobs and invested billions of dollars into the American economy. The tax credit was set to expire soon, but an extension was just passed by both the house and the senate for residential and commercial projects.
What is The Solar ITC?
Since 2006 both residential and commercial solar projects have been eligible for a 26% tax credit. The commercial credit is applied to both customer-sited commercial systems and larger solar farms. A tax credit allows you to subtract the amount of credit you’ve accrued from the total taxes you owe. It has the power to substantially lower your taxes when applied.
The original bill was part of the Energy Policy Act of 2005 and started as a 30% credit. It’s been extended and revised in previous years to what is currently a 26% credit. You qualify by installing solar panels. The tax credit applies to the year the installation takes place. You can claim the credit in multiple years and carry leftover credit.
The solar ITC has been an important force towards clean energy, and the construction of solar panel systems has brought forth a lot of jobs and revenue that otherwise would not have existed. The tax credit has made solar energy more affordable and more popular.
What Does Extending the Solar ITC Mean?
The solar ITC was set to diminish and then expire this year, but as part of a larger federal spending bill approved by both chambers of Congress on Dec 21st, the 26% tax credit has been extended for two more years for both commercial and residential projects started by 2022.
Certain conditions apply to the tax credit, and you can calculate your estimated tax credit with this calculator. If you’ve been thinking about installing solar panels in your home, now is the time before the credit runs out again.
How Residential Projects Benefit From Solar Panel Systems
Solar panels can offset your usual energy costs. A solar panel system requires $0 upfront costs for installation, allowing you to harness the power of the sun for free and start spending less on utilities. Not only will your monthly bills decrease, but the value of your home could also go up. The panels themselves help extend the life of your roof by providing protection from the elements. Even if you live in an area that has more cloudy days than most, the energy on sunny days is captured and stored for later use, making solar workable for everyone across the US. Finally, switching to renewable energy helps preserve the environment and slows climate change. A win for the environment is certainly a win for us all.