The tax bill that Congress passed at the end of 2017 is now officially in effect, and there are changes that impact many industries across the country. Early versions of the bill contained provisions that had the potential to harm renewable energy industries. Luckily, the financial incentives that reduce the cost of installing solar are intact. Below are some of our top takeaways from the recent tax bill.
2017 tax bill won’t impact the federal solar tax credit
The primary solar tax credit used by homeowners in the U.S. is the federal investment tax credit (ITC), which offers a 30 percent tax credit to the owner of a new solar energy system. This is one of the most significant financial incentives for installing solar at the federal level, and it benefits everyone from homeowners to large commercial property owners.
Renewable energy advocates were concerned that this incentive (which was extended at the end of 2015, and will be available through 2021 for residential property owners) would be eliminated in the 2017 tax bill. However the final bill left the ITC intact, thanks both to the universal benefits of installing solar and the bipartisan manner in which the tax credit was extended.
The bottom line: If you’re a homeowner considering solar today, there were not any new changes in the 2017 tax bill that will lessen the economic benefits you’ll receive from a solar installation. Start exploring your options today.
Bonus: the EV tax credit was saved, too
The House version of the tax bill would have eliminated the tax credit for electric vehicles, which offers up to $7,500 to buyers. However, that didn’t make it into the final bill, meaning that a big incentive to buy electric cars is still available.
Tax bill may impede large-scale solar investments
A provision known as the Base Erosion Anti-Abuse Tax (BEAT) provision was introduced in the Senate version of the 2017 tax bill. The initial version of the BEAT provision would have had a major impact on large-scale solar investments.
Renewable energy developers will often sell their tax credits to multinational banks in order to finance their projects. However, the BEAT provision placed a 100 percent tax on U.S. tax credits claimed by companies that operated overseas. As a result, if the BEAT provision had been included in the final bill, multinational banks would not be able to use those tax credits, making it much more difficult for solar developers in the U.S. to access financing for their renewable energy projects.
A major lobbying effort by organizations like the Solar Energy Industries Association and American Council on Renewable Energy ensured that the negative impacts of the BEAT provision were substantially reduced by allowing multinational investors to use these tax credits. However, some adverse effects may arise in 2018 and beyond.
That said, changes to the corporate tax code could actually create additional benefits for companies that want to install solar. An analysis at Greentech Media found that the reduction in corporate tax rates, plus the expansion of depreciation allowances, could result in both a higher return on investment (ROI) and greater project value for commercial solar installations.
Find out how much you can save by going solar, thanks to the ITC and other incentives
The ITC is one of the best financial incentives for installing solar in the United States, along with state tax credits, utility-scale rebates, and programs like net metering. However, these incentives won’t be around forever. If you’ve been thinking about going solar, there’s no better time than the present to start shopping. You can use EnergySage’s Solar Calculator to learn about the long-term financial benefits of installing solar, as well as the incentives available near you.