Solar power is one of the fastest growing energy sources in the world. The sun provides a tremendous resource for generating clean and sustainable electricity. One of the most important things about solar energy is that it is renewable. Another benefit of going solar is the environmental factor and positive impact on the environment, like reduction of air pollution, greenhouse gases, as well as water usage decrease. economical and diminution of electricity bills, There are also financial benefits to solar energy usage, such as savings through lowering your electric bill.
Despite endless benefits of solar power usage and ongoing progress in this sphere, renewable energy still makes up about 17% of electricity generation in 2019, and solar energy is nearly 11% of total renewable energy production in the United States, which is about 2% of total electricity. Today, tax policy continues to provide stability and investment opportunities for the development of solar power. Home solar systems can be qualified for the Federal solar tax incentive, also known as the Investment tax credit (ITC) and other energy incentives.
The federal solar tax credit is one of the best financial incentives for solar in the United States. The solar Investment Tax Credit (ITC) is one of the most important federal policy mechanisms to support the growth of solar energy. The incentive runs since 2006. In 2019, the Federal Investment Tax Credit for qualifying solar energy systems on residential or commercial properties was 30%. It is currently 26%, and by the end of 2020 it will drop from 26 to 22. By 2021, the residential credit will drop to zero, while the commercial credit will drop to 10%. So, you better hurry if you want to gain from the program.
How to Get a Solar Tax Credit in 2020?
The main requirement for solar tax credit eligibility is owning the solar energy system. If you install your system with solar lease or a solar PPA, then you are not going to be eligible for the program. The owning company of your system will receive the Tax credit, but they usually take it into consideration when calculating the lease rate.
Moreover, if you are the owner of the system but don’t have enough tax liability to claim the entire credit in one year, you can use the remaining credits in future years. To claim the tax credit, you must fill a yearly federal tax return. Do not forget to mention that you are implementing solar energy on your commercial property using IRS Form 3468 (Investment Tax Credit).
Calculating Your Solar Tax Credit 2020
When you want to calculate the 26% Tax Credit, you should know that it differs for homeowners and commercial businesses. Homeowners calculate the 26% on the net installed cost. If the total cost for your solar system installation was $15,000 and you received a utility or state rebate of $3,000, your total upfront expense will be $12,000.
Your 26% ITC will be:
26% x $12,000 = $3,120 solar tax credit.
For businesses installing commercial solar projects, the rebate is calculated on the gross installed cost of the solar system.
Your 26% ITC will be:
26% x $15,000 = $3,900 solar tax credit.
Therefore the business has to pay tax on that $3000.
More Tips When Going Solar
The federal solar tax credit is one of the best financial incentives for solar in the United States. But there are other options to reduce the energy costs as well. Many states in the United States offer tax credits for solar going solar. Some will continue even after the federal credit expires. In California it is possible to get a cash rebate covering the battery costs through the Self-Generation Incentive Program (SGIP) established by the California Public Utilities Commission (CPUC).
The Self-Generation Incentive program provides incentives to help reduce the costs of energy storage. In case you meet all the requirements needed, your system can be eligible both for the 26% Federal ITC and the California SGIP incentive.
Investing in solar energy is an important step. So, before making a decision you should research as many solar energy options as possible. In addition, solar energy is a little bit complicated field, so to get the tax credit benefits, tax professional consultation is required.
LA SOLAR Group specialists will help you understand what is better for you – lease or purchase. They will also give you more information on federal solar tax credit and calculate the credit amount per year.
Author of a publication: Irene Abgaryan