In December 2020, the President signed the omnibus appropriations and COVID-19 relief bills into law. An important component of this law extends the Investment Tax Credit (ITC) for new solar installations. The ITC was originally designed to promote the accelerated adoption of clean solar energy to qualified residents and tapering off starting in 2021. With the program’s success and the recognized importance of solar, the new law now extends the solar ITC at a full 26% for projects in 2021 and 2022, eventually stepping down to 22% in 2023. The ITC program will retire in 2024.
[content below originally published in 2016]
The United States government has extended the solar investment tax credit through 2021. This occurred when congress, in the omnibus budget, negotiated a deal to allow for the export of US oil in return for energy efficiency and renewable energy tax credits.
The extension of the solar investment tax credit is a major boon to the solar industry. Over the past 5 years, the solar industry has grown exponentially. As pricing for solar panels and inverters have dropped, the installation industry has also achieved greater efficiency. This, in combination with state and federal incentives, has resulted in a residential installation price range that produces cost savings and revenue sufficient to service a loan and produce an excellent rate of return for system owners.
Such efficiencies and reductions in pricing have been achieved as the industry scales. This scale would not have been achieved in such short order without state and federal incentives. The federal solar investment tax credit has spurred the solar industry in the United States to grow at a pace that matches the urgency of our national goals related to economic growth, climate change, and energy independence.
Some day soon the solar industry will be able to compete with other subsidized energy industries such as coal, oil, and natural gas, from the perspective of energy production cost. When that day comes, state and federal incentives should be slowly rolled back to allow the industry to stand on its own. In the process, solar energy will become our primary electricity production resource, replacing unnecessary fossil fuel electricity production.
Until that day, the industry will rely on incentives to help it mature and grow. The federal solar investment tax credit extension is an investment in the health and prosperity of our nations future.
Solar-Electric Property ITC Details:
- 30% for systems placed in service by 12/31/2019
- 26% for systems placed in service after 12/31/2019 and before 01/01/2021
- 22% for systems placed in service after 12/31/2020 and before 01/01/2022
- There is no maximum credit for systems placed in service after 2008
- Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021
- The home served by the system does not have to be the taxpayer’s principal residence