It was a Christmas miracle reminiscent of Charles Dickens’ A Christmas Carol. Congress passed an extension of the federal Solar Investment Tax Credit (ITC) on December 27th, 2020. The President signed off on a 2.3 Trillion dollar spending and relief package. The government shutdown was avoided, and the much-needed Covid-19 relief was included. The American public can expect a two-year extension for the 26% ITC in addition to the $600 stimulus checks. Welcome news for people considering turning to solar power. Approximately $35 Billion was allocated to fund clean energy projects.
What is the Federal Investment Tax Credit?
The Investment Tax Credit is a federal tax credit worth 26% of a homeowner’s solar investment. This includes the equipment, technology, and labor that went into the installation. Enacted in 2006, it is a dollar-for-dollar credit. Before the extension was passed, the ITC was due to be reduced to 22% by January 1st, 2021. By 2022 it would’ve dropped to 0%, zero. Heather Cooper and Philip Tingle of the National Law Review wrote that “The investment tax credit (ITC) under Section 48 was extended by two years. A solar project that begins construction in either 2020, 2021 or 2022 is eligible for a 26% ITC. A solar project that begins construction in 2023 is eligible for a 22% ITC. Solar projects that begin construction after 2023 are only eligible for a 10% ITC. Likewise, solar projects that are placed in service after 2025 are only eligible for a 10% ITC.” Many people are breathing a sigh of relief and can rest easy knowing they have some time.
The Significance of the ITC
A booming solar industry is providing an invaluable service to help prospective buyers become self-sufficient with solar power. Perhaps no policy or incentive has been more effective in increasing solar energy than the ITC. The SEIA, Solar Energy Industries Association, is a leading trade association that stated, “The solar Investment Tax Credit (ITC) is one of the most important federal policy mechanisms to support the growth of solar energy in the United States. Since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 10,000% – creating hundreds of thousands of jobs and investing billions of dollars in the U.S. economy in the process. In 2015, SEIA successfully advocated for a multi-year extension of the credit, which has provided critical stability for businesses and investors.” SEIA also reports that the solar industry has seen an annual growth of 52% since the ITC was enacted in 2006. One cannot emphasize the importance and significance of the federal ITC enough. It has directly influenced the growth seen in the solar sector.
Positive Outlook for the ITC
The extension of the ITC is a big win for the SEIA and all solar enthusiasts. Homeowners will be able to take full advantage of the 26% tax credit. This will save them money and allow households to become energy self-sufficient. What better time for this extension than now, when more people than ever are working and socially distancing at home. This pandemic has affected all people, businesses, and industries. Energy bills are soaring higher than ever, and people are looking for ways to cut costs. Renewable energy offers modern solutions to these problems. Solar energy has adapted from door-to-door sales to internet sales in order to meet consumer’s needs. That’s why the outlook for the solar industry is exceptionally high. The U.S. Bureau of Labor Statistics claims, “Employment of solar photovoltaic (PV) installers is projected to grow 51 percent from 2019 to 2029, much faster than the average for all occupations. The continued expansion and adoption of solar PV systems will result in excellent job opportunities, particularly for those who complete training courses on solar panel installation.” Once again, solar is booming, and much of it is due to the solar, federal ITC. To learn more about solar, check out our site, click here. You can also receive a free quote on our site.