One of the many factors contributing to the massive expansion of solar energy over the last decade is the 30% federal solar investment tax credit, known more simply as the ITC. In short, the ITC allows businesses that go solar to offset up to 30% of the purchase price in the form of a federal tax credit. Sadly, though, this great program is about to start getting a lot smaller.
2019 marks the end of the current 30% rate. In 2020, the ITC begins ramping down as part of a three-year decline toward a permanent 10% credit for commercial solar projects beginning in 2022. So, if you want the fastest and biggest return on your commercial solar investment, this is the year to act. Given the demand on solar installers in this final 30% year, the sooner you start your commercial solar project, the better. Below we cover important parts of the ITC and explain why acting now will give you the best return on your commercial solar investment.
What is the ITC?
First established as part of the Energy Policy Act of 2005, the solar ITC is a dollar for dollar tax credit that allows organizations to reduce the gross cost of the solar system by 30%. To qualify, the business must have a tax liability upon filing. In other words, if the business owner is going to receive money back from their tax return, then the credit will not be applied for that year and will simply roll forward to the next.
The incentive's original expiration date was extended twice, with the most recent extension taking place in 2016. That extension detailed the current ramp down schedule that decreases the tax credit each year until permanently remaining at 10% starting in 2022 for commercial solar projects. With our current political climate, it is unlikely that congress will offer another extension, so we encourage you to capitalize on the 30% rate NOW before it's gone.
What is the ramp down schedule?
The current 30% rate is in place through the end of 2019, so this is the last year to reap the maximum return from this lucrative incentive program. In 2020, the ITC reduces to 26% and then drops again to 22% in 2021. From 2022 onward, the commercial ITC will remain at 10% permanently for commercial customers, while ending completely for homeowners.
2019 just started, so I have plenty of time, right?
11 months seems like a long time, so it's natural to think there's plenty of time for your business to claim the 30% solar tax credit. But going solar involves many steps as well as coordination with outside entities for engineering, permitting, and commissioning. Plus, reputable installers like Sun Valley Solar Solutions are already seeing tighter installation schedules than normal as businesses rush to make the 30% deadline.
At Sun Valley Solar, we always say, "The best day to go solar was yesterday" and with each passing day, that hyperbole holds more and more truth. With the 30% ITC coming to an end, 2019 is surely the most important year for solar in more than a decade. Contact a member of our commercial solar team to schedule a consultation and start your solar project today!