2020 ITC Phase Down
Postponing big-ticket investments isn’t always smart.
Americans are becoming more aware of the need to decrease their carbon footprint. However, without the right price tag, they are unwilling or unable to make the leap.
Which is why the Energy Policy Act of 2005, was signed into law. It provides tax incentives and loans for different clean energy types. One of the energy types qualified for a tax credit is solar panels.
How Does the Federal Solar Tax Credit Work?
Those that qualify for the federal solar investment tax credit (ITC) get a dollar for dollar credit. This solar tax credit deducts a percentage from the cost of solar and takes it out of owed federal taxes.
This credit, however, isn’t immediate. The customer purchases the system, then the next tax year they file for the credit.
Another particularity of the federal ITC is obtaining it. Although it is a dollar for dollar credit it isn’t given all at once.
Solar Tax Credit Carryover
Those that owe less than their tax credit only get what they owe in federal taxes for that year. The rest is then rolled over from one year to the next until it is gone. Meaning recipients don’t get the full amount in one lump sum.
There isn’t a set amount of time that this will roll over for. It depends on how much is owed each year and the amount that the government owes you.
Do I Qualify for the Solar Tax Credit?
To qualify for this credit individuals first need to own the solar array. Leased solar systems get this tax credit, however, it goes to the solar company that owns it.
The second thing needed is taxable income. Those that live off of social security and don’t owe federal taxes have nothing to apply this credit to.
Although it may seem obvious it still needs to be stated. People can’t qualify for this tax credit if they don’t have solar panels. To do this, you need a qualified roof, good credit or cash and an average of 500-kilowatt-hours of electric usage a month.
How the Federal Tax Credit is Changing in 2020
What most aren’t aware of, is that this solar tax credit is phasing down. Meaning those that don’t install solar before the end of the year will end up paying more for their system.
Currently, the federal tax credit (ITC) covers up to 30 percent of the cost of solar. For many installing solar this credit saves thousands of dollars.
The ITC, however, is decreasing to 26 percent after December of 2019. This only gives those considering solar a couple months to get a solar array.
What the Solar Phasedown Means for Residential Solar
Solar has become more than a way to help the environment. The savings from the ITC has made it cheaper than fossil fuels.
However, those that don’t get solar before it starts to step down will miss out on some of these savings. This is why Go Solar Group is sending out the warning flag.
Those that are considering solar shouldn’t hesitate. If you want solar, but are waiting until its affordable, now is the time to invest.
Not only does a solar loan cost nothing upfront, but it replaces a bill you are already paying. In addition, over the life of the system, it ends up costing less than what you would have paid.
Investing in solar makes sense. Installing your solar array before the federal ITC decreases is a no brainer.