congress extends the solar tax credit itc

Solar tax credit – everything you need to know about the federal ITC for 2019

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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 energy 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 saves over $5,000 on the cost of going solar in 2019.

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 is complete, 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.

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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. 

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.

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85 thoughts on “Solar tax credit – everything you need to know about the federal ITC for 2019

  1. Flo Samuels

    I have searched the IRS and other sites on the net and see nothing about the tax credit law being under review. If you are only getting 10% at this time it is possible the amount you owe only equals 10% of the credit available to you. If what you owe is more than the 10% of your available credit I suggest you ask your tax person to provide the site on the internet where this is stated.

  2. Flo Samuels

    One more point. I had five solar installers out for bids. (We live in Santee CA). EVERY ONE OF THEM lied to me.
    One was a lease where he pointed out the savings on my electric bill and the deduction for the tax credit. There is no tax credit TO THE PURCHASER on leased systems.
    The other four told me I needed to have the systems installed by Dec 2018 as that was the end of the credit. The FULL credit ends in 2019 and a reduced credit is available until 2022. So two lies in one.
    Note I got some names off Energy Sage so I suggest the site owners do a little more research before recommending installers.

  3. Flo Samuels

    Wallace. I don’t know how they get the money but this is what I believe. I am not a tax expert but my and my son’s taxes are not simple and I’ve been doing them for 30 years. We own/owned houses, he and I have been 1099, we rent rooms in our houses, etc.

    The credit is intended to give you a refund on your taxes. The solar guys expect that refund will be used to pay down the loan. I do NOT know how they will get that money from you or if you are expected to pay it up front but that is the logic. I have an example below

    Using a $25,000 cost of the solar installation, 30% (the tax credit) or $7,500 will be available to you to balance off against what you owe in taxes.

    So let’s say that for 2019, $4,000 is deducted from your paycheck for federal taxes. You do your taxes and of that $4,000 you only owe $3,600. Normally you would get back just the $400 you don’t owe. But if you have a solar credit of $7,500 you can apply that to the amount you really owe. So you would get back the $400 you don’t owe PLUS the $3,600 that you do owe. The $3,600 would be part of the solar credit.

    Since you didn’t use all of the credit ($7,500-$3,600) the difference of $3,900 is available to you next tax year and the next if you still have credit left.

    The solar company would expect you to pay them the $3,600 you got back due to the credit.

    Now here are two kickers.
    1. What if you don’t owe much? You will never use up all the credit and you will never be able to pay down the expected 30% on the loan with your refunds. Your savings on the system will be much less than presented, your total payments a lot more.
    2. What if you are 1099 and do not pay in quarterly installments. If you owe $1,000, the credit will mean you will not have to pay the IRS. But you will have to pay that amount to the solar loan.

    When I presented those questions to solar reps they would not respond. So they are considerations for anyone getting solar.

    My son and I joint own our house and we are considering solar. However, if the payments for the system average more than our payments to the utility, we question the logic. We are still considering.

  4. Frank Gatto

    Flo I believe what you say is correct. I believe the credit has hurt the solar customer by allowing the installers to raise their prices by 30%, and still have the math work in the customers favor. It does this by being equal to or slightly less than the current payment made by the customer to the utility. If you have a very low tax liability you will probably never see the full benefit of the credit. Once the credit goes away the industry will have to find a way to reduce cost to make solar equal to, or lower in cost to paying the utility every month.

  5. William Meade

    Tax credits can be applied to your lease if the company doing the lease allows it. You should get multiple bids with the tax credit and without using the tax credit. Yes some companies will try and take advantage of the consumer. Consumer reviews are very important so use them to guide you in the right direction. Engage Solar Energy is the way to go.

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