Solar Solutions of America

The Federal Solar Tax Credit: How It Works

The time to get solar is now!

If you are thinking about getting solar for your home or business, take advantage of the 26% Federal Tax Credit before December 2020!

After December 2020, the 26% tax credit will decrease to 22% in 2021 and then to nothing the year after.

In this article, we will discuss what the 26% tax credit is and how it works.

The Federal Tax Credit

The Solar Investment Tax Credit (commonly called the ITC) was first offered via the Energy Policy Act of 2005. 

Thanks to its popularity and its contribution toward renewable energy goals, the ITC has been extended multiple times. While it was originally set to expire in 2007, the current federal solar tax credit extension is set to expire in 2022. Homeowners can use the federal tax credit for battery storage, installing new systems, and more.

When you install a solar power system, the federal government rewards you with a tax credit for investing in solar energy. In fact, 26% of your total project costs (including equipment, permitting and installation) can be claimed as a credit on your federal tax return.

A tax credit is a dollar-for-dollar reduction of the income tax you owe. $1 credit = $1 less you pay in taxes. It’s that simple. If you spend $10,000 on your system, you owe $2,600 less in taxes the following year. 

It’s important to note that a credit is different than a refund, because you have to owe taxes to claim the incentive. But since most people owe taxes, most people end up being eligible for the Federal Solar Tax Credit.

The credit steps down in value over the next few years, until it disappears completely for residential customers in 2022. Here’s the value of the federal tax credit over the next few years:

  • 2020: 26%
  • 2021: 22%
  • 2022: 0% (10% for commercial projects)
We can’t recommend enough that you capitalize on the full 26% credit, because the value only shrinks after 2020.

The 2020 solar tax credit alongside our financing options will help you save money and own your power. 

Call us at 248-805-1244 or contact us here to take advantage of this opportunity before time runs out!

For more information about solar, visit our Solar 101 page or our FAQs page.

Click here to learn about the financing options we offer.

Ready to get solar? Contact us here to set up a FREE home or business analysis .

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