Before we get into solar, what is a Tax Credit?
A tax credit is money that the government gives taxpayers back from what they paid in to taxes. It is a dollar-for-dollar reduction in income taxes from your federal tax filing. If you earn a $5,000 tax credit, your federal taxes will be $5,000 less.
What is a Solar Tax Credit?
The Solar Tax Credit is an Investment Tax Credit (ITC) from the Federal government for those who decide to go solar. Provided that you pay enough in Federal taxes and that you own the system (no leases), the credit is available to both residential and commercial customers. Since being enacted in 2006, the government has maintained a 30% tax credit for people that go solar. This means that you could get 30% of your solar system cost back.
For example, if your potential solar system costs $20,000, a 30% tax credit would be $6,000. Customers may take their tax credit over up to five years.
Why would the government do this?
Offering an investment tax credit for going solar encourages customers to pursue green energy options of producing electricity, specifically solar system installation. Because customers can install a solar system for less upfront cost, they are more eager to install. Since 2006, the industry has grown by 10,000%!
However, because there is a great and growing interest in solar, the tax credit is being fazed out.
Wait, this is going away?
Yes, but fortunately not all at once. Like we mentioned, the tax credit is currently at 30% for solar system owners. In 2020 it is set to step down to 26%, and in 2021 it is set to step down again to 21%. Following in 2022, the tax credit will only be available to commercial owners at 10%. Of course, there is the possibility that Congress will change the step-down rate again, or extend the tax credit to be more favorable. We will have to wait and see, but for now we have the current rates charted out below:
What does this mean for me?
Regardless of if you are planning to purchase or lease your solar system, now is a great time to go solar. The 30% solar investment tax credit is still available to customers both residential and commercial who want to go solar in 2019. If you wait another year, your initial upfront costs are going to be more than if you went solar today.
Contact us at SAVKAT today and we will set you up with a solar consult to learn more about what it would actually cost for you to buy a solar system. We will get you a proposal with real numbers to look at as you consider making your decision. Call us at 860-288-7557 or send in your contact info here.
If you have already gone solar, we would love to hear your comments on collecting your federal investment tax credit and how the process was for you!