It has been astounding to watch the popularity of the investment tax credit (ITC) take place over the last several years. The expiration was set for the end of 2007 after it was originally established by the Energy Policy Act of 2005. That clearly did not happen due to its success in supporting our country’s transition to a more renewable energy economy. Hence why Congress expanded its expiration date multiple times over the years. Now, the ITC is available to homeowners, a residential solar tax credit, through 2021.
What Is The Residential Solar Tax?
In December of 2015, Congress approved the 2016 federal spending bill containing a 5-year solar tax credit extension. The overall takeaway from the ITC is that you are allowed to deduct 30% of the cost of your solar energy system installment from your federal taxes. It can be applied to both commercial and residential systems with no cap on its value. This bill makes solar energy more affordable for Americans, especially those that have taken advantage of the residential solar tax.
Due to the ITC, the average shopper could have saved over $5,000 to $9,000 in 2019 for going solar. The cost of solar energy systems have dropped significantly, which has created a more affordable and beneficial transition to the solar way of life. However, now that it is the end of 2019, what happens with your residential solar tax credit?
The Future Of Residential Solar Tax Credit
Since the bill was passed with a 5-year extension to solar tax credit, the end of 2019 may be the last time to reap the benefits of the 30% residential solar tax credit. If you have yet to install your solar energy system on the residence that you own, you may want to consider installing as quickly as possible. You can still receive the 30% residential solar tax credit by installing and having the solar property in use before December 31, 2019.
Come the 2020 tax year, the residential solar credit goes from 30% to 26%. The following tax year of 2021, the percentage drops once again from 26% to 22%. Eventually the residential solar credit will terminate in the tax year of 2022. This is your time (before December 31, 2019) to take advantage of what the ITC has given you.
With questions regarding your commercial or residential solar tax credits, NESCO is here to help. We assist and work on your behalf to find tax planning opportunities that suit your needs. Call us today to find out more about our services!