We're just about to start September—so why are we talking about taxes right now? Simple. If you’re interested in taking advantage of the full 26% federal solar tax credit before it declines again on January 1, 2023, you need to act now.
The rush to claim this lucrative incentive is extending permit backlogs and packing installation schedules all the way into the fall and winter months. In short, if you want the best chance of claiming the full 26% solar tax credit on your 2020 taxes, don't wait.
This year the tax credit sits at 26% as it continues its decline towards 0%. In 2023, the incentive drops to 22%. On January 1, 2024, it ends permanently for homeowners. So, if you’re looking for the quickest payback for your solar investment, this year is your year. With permit backlogs running into 6 weeks in some cities and installation schedules filling up fast, delaying is unwise. To help put all this into perspective, we've put together three reasons to start your solar journey today.
1. 26% Federal Investment Tax Credit
As mentioned above, the current 26% rate is in place through the end of 2022, so time is starting to run out to reap the maximum return from this lucrative incentive program. In 2023, the ITC reduces to 22% before ending completely for residential customers in 2024. The commercial ITC will remain at 10%.
While the 26% rate still sounds pretty good, it actually has a sizable impact on the payback period, extending it by a factor of several years in some estimates. When it drops to 22% in 2023, the payback period will extend yet again. So, if you're inclined to turn Arizona's most abundant natural resource into immediate energy savings, we strongly recommend grabbing the 26% rate before while it's still here.
2. $1,000 State of Arizona Tax Credit
At the state level in Arizona, not only is there no sales tax charged on the purchase of a solar energy system, but you can also receive a state income tax credit of up to $1,000 for a solar purchase. Like the federal ITC, in order to qualify for the Arizona solar tax incentive, your system must be installed before the end of the tax year you wish to file for.
3. Installation Timelines
Just as Rome wasn’t built in a day, a residential solar energy system isn’t installed overnight. From HOA paperwork to permits and utility commissioning, there are many outside entities involved with a solar installation. Your chosen solar installation partner should handle all of this for you, but each of these entities are experiencing large backlogs as people rush to claim the full incentive before it's gone. While it varies from city to city—with some permit backlogs as long as 6 weeks—we recommend locking in your solar contract before the end of September in order to ensure enough time to complete permitting, design, installation, and commissioning before the year ends.
As people rush to make ITC deadline, solar installation schedules are quickly filling up as well. We're experiencing this firsthand at Sun Valley Solar. To ensure you have enough time to qualify for the full full 26% tax credit on your 2020 taxes, start your solar project today.
If you'd like to claim the 26% solar tax credit, now is the time to act. Contact one of our qualified solar integrators to start your solar project today!