Solar energy is at the forefront of renewable energy. It continues to increase in popularity, installations, and affordability. Covid-19 might have hit the pause button on door-to-door sales, but it could not slow the number of installations. Solar technology is becoming inexpensive, more efficient, and much more incentivized. Americans are turning away from their reliance on fossil fuels, and solar energy is becoming integral for American self-sufficiency. Solar combats climate change and rising utility costs. Lawmakers have rallied around this call to arms. Politicians have noticed this trend and created a policy to incentivize consumers. Perhaps the most massive incentive is the ITC, Investment Tax Credit.
What is the Solar Investment Tax Credit?
The Investment Tax Credit, or ITC, is precisely that. It is a tax credit for purchasing and installing solar equipment. It was enacted in 2006 but will end in 2022 for residential installations. The ITC is a 26%, dollar for dollar, tax credit based on the cost of solar equipment installed by a homeowner, business owner, or utility company. You can claim a reduction in your federal income taxes based on 26% of the total cost for your solar installation. Both residential and commercial properties can benefit from the ITC. There is no limit to the credit or reduction of taxes. Pretty sweet deal, right? Yes!
The Solar Industries Energy Association, or SIEA for short, has reported that this ITC has caused solar growth to increase by an average of 52% annually. It is directly responsible for massive growth in the solar energy sector. Initially, the ITC rate was 30%. It has declined to 26% this year. Next year it will only be 22%, and by 2022 it will be obsolete at 0% for residential installations. When the plan was first implemented, the program was only intended for a year. Solar advocacy groups argued in favor of extending this credit. Congress agreed and has since expanded the ITC multiple times. As of now, 2022 is the end of the ITC for residential households.
What Expenses are Included in the ITC?
The Federal government allows homeowners to include within their ITC the: solar photovoltaic panels installed, system-balancing equipment, and the cost of labor. So, PV cells, wiring, inverters, mounting kit, permits, inspection fees, etc. can be included in your ITC. Everything that goes into the installation may be included in the ITC. The ITC will put more money in your pocket by decreasing how much income taxes the federal government can withhold. Imagine being able to save even more money from switching to solar energy. Not only would your energy bills decrease, but the tax credit would also add to your savings.
If you have been considering converting to solar energy, you may have noticed that this year’s ITC rate is 4% lower than the previous year. You may have also seen that next year’s ITC rate will only be 22% after another 4% decrease. This decline will persist for those that have not taken advantage of the ITC. The time to act is now. If you are contemplating making the switch to self-sufficiency, you may want to act sooner rather than later. The longer you wait, the closer the 26% ITC deadline approaches. After this year, the additional tax credit will be lost. Many homeowners are taking advantage of the 26% ITC. Households are showing a sense of urgency. Congress, on the other hand, is not. There are no talks to extend or increase the ITC soon. In 2022 the only ITC available will be for commercial and utility companies, and that rate will then be cut to just 10%, 0% for homeowners.
The Next Step
People interested in taking advantage of the ITC should act now. Even if you only want to put solar panels on your vacation home, you can! Primary and secondary homes are covered and included in the federal ITC. Now, we are inching closer and closer to the end of the year. It is the holiday season, and winter is approaching. The pandemic has not entirely subsided, and people are going to be inside for the season. Electricity and utility bills will be increasing. To start saving, contact a local solar panel dealer. They can give you a quote, and you can see firsthand just how much you will save. The average ROI or return of investment for residential PV installations is approximately eight years. Why wait? The choice to start saving money is now.
Here at Region Solar, we are committed to giving you the highest quality equipment and service. If you would like a free quote, contact us here. If you are still on the fence about taking that next step, you can check out our blog for helpful information here. We look forward to helping you on your journey to becoming self-sufficient.