Congress extends solar tax credit – everything you need to know about the federal ITC

federal solar tax credit itc extension

Congress has voted to extend the solar tax credit for homeowners through 2021.

Homeowners, solar companies, and industry advocates alike were given a big Christmas gift in 2015 when Congress approved the 2016 federal spending bill and extended the solar panel tax credit. The December 18 bill contained a 5-year solar tax credit extension, which makes solar more affordable for all Americans. Wondering how this impacts you? EnergySage has the answers.

What is the solar tax credit?

The federal solar tax credit, also known as the investment tax credit (ITC), allows you to deduct 30 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value. Thanks to the ITC, the average EnergySage Solar Marketplace shopper saved over $5,000 on the cost of going solar in 2017.

What does the federal solar tax credit extension mean for the solar industry?

The federal ITC was originally established by the Energy Policy Act of 2005 and was set to expire at the end of 2007. A series of extensions pushed the expiration date back to the end of 2016, but experts believed that an additional five-year extension would bring the solar industry to its full maturity. Thanks to the spending bill that Congress passed in late December 2015, the tax credit is now available to homeowners in some form through 2021. Here are the specifics:

  • 2016 – 2019: The tax credit remains at 30 percent of the cost of the system. This means that in 2017, you can still get a major discounted price for your solar panel system.
  • 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
  • 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
  • 2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.

Additionally, in previous years, owners of new solar energy systems could not claim the tax credit unless their system was operational. Now, the legislation allows them to claim it as soon as the construction of the system begins, as long as it is operational by December 31, 2023.

Do I qualify for the solar panel tax credit?

As long as you own your solar energy system, you are eligible for the solar tax credit. Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect. However, remember that if you sign a lease or PPA with a solar installer, you are not the owner of the system, and thus you cannot receive the tax credit.

How do I claim the solar tax credit?

You claim the solar tax credit when you file your yearly federal tax return. Remember to let your accountant know you’ve gone solar in the past year, or if you file your own taxes, use EnergySage’s step-by-step guide on how to claim the solar ITC. 

solar tax credit

More resources on the extension of the federal ITC

Three Tips for Solar Shoppers

  1. Homeowners who get multiple quotes save 10% or more

    As with any big ticket purchase, shopping for a solar panel installation takes a lot of research and consideration, including a thorough review of the companies in your area. A recent report by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) recommended that consumers compare as many solar options as possible to avoid paying inflated prices offered by the large installers in the solar industry.

    To find the smaller contractors that typically offer lower prices, you’ll need to use an installer network like EnergySage. You can receive free quotes from vetted installers local to you when you register your property on our Solar Marketplace – homeowners who get 3 or more quotes can expect to save $5,000 to $10,000 on their solar panel installation.

  2. The biggest installers typically don’t offer the best price

    The bigger isn’t always better mantra is one of the main reasons we strongly encourage homeowners to consider all of their solar options, not just the brands large enough to pay for the most advertising. A recent report by the U.S. government found that large installers are $2,000 to $5,000 more expensive than small solar companies. If you have offers from some of the big installers in solar, make sure you compare those bids with quotes from local installers to ensure you don’t overpay for solar.

  3. Comparing all your equipment options is just as important

    National-scale installers don’t just offer higher prices – they also tend to have fewer solar equipment options, which can have a significant impact on your system’s electricity production. By collecting a diverse array of solar bids, you can compare costs and savings based on the different equipment packages available to you.

    There are multiple variables to consider when seeking out the best solar panels on the market. While certain panels will have higher efficiency ratings than others, investing in top-of-the-line solar equipment doesn’t always result in higher savings. The only way to find the “sweet spot” for your property is to evaluate quotes with varying equipment and financing offers.

For any homeowner in the early stage of shopping for solar that would just like a ballpark estimate for an installation, try our Solar Calculator that offers up front cost and long term savings estimates based on your location and roof type. For those looking to get quotes from local contractors today, check out our quote comparison platform.

 





solar tax credit itc graphic




36 thoughts on “Congress extends solar tax credit – everything you need to know about the federal ITC

  1. Pingback: Be careful when it comes to that rooftop solar tax credit - The San Diego Union-Tribune - Richardson Roofing, Inc.

  2. Andy

    Clarifying question – regarding the sentence “Now, the legislation allows them to claim it as soon as the construction of the system begins, as long as it is operational by December 31, 2023.”
    Your writing seems to imply that this applies to residential scale solar projects, but my understanding is that this is what’s known as the “commence construction clause”, and applies only to larger scale commercial solar projects. As I understand it, the residential tax credit is still qualified for when the project is “placed in service”, which would likely mean the date it sees utility approval to operate. Is that right, or is there something I am missing?

    Reply
  3. Linda Poppenheimer

    Sara,

    Thanks for this piece about the solar tax credit extension. I especially appreciate you providing a link to the actual bill and letting readers know to start reading at Section 303, beginning on pg. 2005.

    Reply
  4. Pingback: Solar on Wissahickon Avenue | Northwest Philly Solar Cooperative

    1. Joe A

      There is no reason under the sun for Trump to repeal this tax credit. It rewards those who spend money putting others to work.

      Reply
      1. RESJR

        I think that is a rather brash statement to make. The jobs are in sectors he does not favor rather than in coal mines or steel mills. He will need some more revenue offsets to help justify his newly proposed cuts to corporate rates. I think there is a very good chance that he will move to cut this incentive.

        Reply
        1. Teslaisbetter

          Based off what your opinion? Just stop there is no talk of repealing this credit, trump actually supports it. And the republican congress is the one who extended it. But keep pushing so people jump on it

          Reply
  5. Pingback: Second in the series of local solar installations – Northwest Philly Solar Cooperative

  6. Pingback: Roxborough home with rooftop solar – Northwest Philly Solar Cooperative

  7. Pingback: Tesla Solar Roof: Cost Estimate with Powerwall 2 and Electricity Costs Included - Ben Sullins | Data Geek

  8. Michael Amico

    Hello, can you please clarify the comment “legislation allows them to claim it as soon as the construction of the system begins, as long as it is operational by December 31, 2023.’ Where is that stated?

    I searched for this and only found Section 304 (below) which indicates the system must be placed in service.

    Section 304 – Extension and phaseout of credits with respect to qualified solar electric property and qualified solar water heating property.

    Extends a tax credit for qualified solar electric property and qualified solar water heating property for five years to December 31, 2021. Includes a phaseout that makes the applicable percentage of the tax credit: 30 percent for property placed in service after December 31, 2016, and before January 1, 2020; 26 percent for property placed in service after December 31, 2019, and before January 1, 2021; 22 percent for property placed in service after December 31, 2020, and before January 1, 2022.

    Reply
  9. Pingback: Can You Still Get A Solar Energy Tax Credit? - National Consumer Advocate

  10. Pingback: How To Protect Yourself From Home Invasion

  11. Pingback: How To End-Run The Threat Of Home Invasion

  12. Pingback: Are you eligible for the Energy Star tax credit?

  13. Pingback: How much does a 4,000 Watt (4 kW) solar system cost? – Clean Energy Movement

  14. Pingback: Tesla Solar Roof: Cost Estimate with Powerwall 2 and Electricity Costs Included – Teslanomics

  15. Pingback: Tesla Solar Roof: Cost Estimate with Powerwall 2 and Electricity Costs Included | Teslanomics

  16. Emily

    Will this tax credit extend through 2017? Can Trump/Congress eliminate this program? And if so, how quickly could the program be eliminated.

    Also, if construction of my solar system begins before April 2017, do I have to file it on my 2016 taxes, or can I file it on my taxes next year?

    Reply
  17. Pingback: Solar panel installation is too expensive | Radiant Solar Solutions

  18. David Lafferty

    I’m trying to figure out if this makes sense to install a solar heated pool. I just bought a house in Florida as a vacation rental investment. I’d love to know what it costs to install one and how many months out of the year it would work in south Florida.

    If I have to still add the gas to it I’m not sure it’s cost effective for this project.

    Reply
  19. Pingback: CEO Of My Own Utility Company: Can I Beat The Stock Market? – Seeking Alpha – The Conservative Investor Daily

  20. rozdzielacze proporcjonalne

    Do you mind if I quote a couple of your articles as long as I provide credit and sources back to your website?
    My blog is in the very same niche as yours and my visitors would certainly benefit from some of the information you provide here.
    Please let me know if this ok with you. Thank you!

    Reply
  21. Todd Boyle

    Is the credit a REFUNDABLE type credit, or only paid to taxpayers who are otherwise paying lots of income taxes? I am below the poverty line, i don’t pay much income taxes.

    Reply
    1. Sara Matasci Post author

      Hi Todd,
      The credit is not refundable, so the amount you receive in a year is capped by the amount you owe in income tax. However, it also rolls over into future years. For example, if you owe $1,000 in income tax in 2016 and install a solar system that qualifies for a $3,000 credit, you’ll only receive $1,000 from the IRS in 2016. However, the following year, you can apply the extra $2,000 against the taxes you owe that year.

      Homeowners who don’t owe much in taxes can often benefit from a solar lease or PPA, wherein a solar company owns and operates solar panels on your behalf.

      –Sara
      Content @ EnergySage

      Reply
  22. Pingback: Qualities of a Sustainable Home | | True Luxury Life

  23. Pingback: The trade flap roiling the solar industry — and Trump may have the final word - Global Journal

  24. Dani

    Thanks for this terrific post. The details has actually already helped me with myy job where I was stuck and didn’t recognize exactly what to do as following step.
    Looking forward to your next messages!

    Reply
  25. Pingback: How (and Why) to Make Your Business More Eco-Friendly | ThriveHive

  26. Alan Landzberg

    Can a 501c3 tax-exempt organization obtain this credit from expenditures made in a tax-exempt activity (e.g., re a tax-exempt facility) and use the credit against tax from a UBTI activity?

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *