Whether for home or business, solar in 2021 is the best deal EVER! Make it your resolution to reduce dependence on the traditional energy system and help the environment
2021 is on track to be the biggest year for solar yet!
A huge win for solar was achieved in late December last year. Congress finally approved a 2-year extension on the 26% federal tax credit. This means that the perfect conditions for great soar pricing are beginning to line up. Not only has the price fallen dramatically over the years, but the incentives which reduce the cost are also now heavily stacked in the home owner's favor.
- Despite a small bump in the road due to trade tariffs, pricing on solar panels is the lowest it’s ever been (in fact, solar panels have declined in price 99% in the last 40 years).
- The solar Investment Tax Credit (ITC) was scheduled to drop from 26% to 22% at the start of 2021. Instead, the credit will remain available at 26% for both homeowners and businesses for solar projects constructed in the next two years.
- An uncapped 26% federal tax credit on residential solar electric (PV) systems remains in effect through the end of 2022. 2023 will see a step-down to 22%, and the tax credit is currently scheduled to end completely in 2024 unless new legislation is passed.
- In 2021, businesses can get a 26% federal investment tax credit in addition to state rebates.
- Businesses can also take bonus depreciation on solar projects, accelerating the return on investment even more.
Federal Solar Tax Credits & Incentives
Residential 26% Federal Tax Credit
The 26% federal tax credit is called the “Residential Renewable Energy Tax Credit” and was established by the federal Energy Policy Act of 2005. The 26% includes all cost of labor as well as equipment costs for the renewable energy system. The credit can also be carried forward to future tax years if you cannot take the full credit in the year the system was installed.
Furthermore, the IRS has issued guidance suggesting that battery storage systems, when charged with electricity from solar electric arrays, are eligible for the tax credit.
The credit was originally scheduled to be discontinued year-end, 2015, and then in 2020. However, it was extended again in December 2020 with the passing of the bipartisan stimulus bill in response to the COVID-19 pandemic. The bill introduced the following timetable:
- 26% for systems placed in service after 12/31/2020 and before 01/01/2023
- 22% for systems placed in service after 12/31/2022 and before 01/01/2024
- A homeowner claims the 26% credit on IRS 5695, Residential Energy Credits (PDF)
- The Solar Energy Industries Association has a great solar federal tax incentive FAQ
Source: Revision Energy