In December 2015, the United States Congress passed a bill extending the solar investment tax credit for 5 years. If you have ever considered producing your own electricity from solar, that sounds great, but what does it really mean?
First, let’s review what was in place before this most recent bill was passed. Some form of the tax credit was in place since 2006, and in 2008 the credit was determined to be in effect through 2016 for both homeowners and business owners. At the end of 2016, the residential version of the tax credit was to be eliminated and the business tax credit would have been reduced to 10%.
Given the growth and the success of the solar industry, this change would have come as a blow to many jobs and the long term success of the shift to clean energy in the United States.
What Changed in December 2015
So what happened in December 2015, and how does that affect us moving forward? The bill that Congress passed in December extended the 30% tax credit to projects installed through 2019, which was a 3-year extension of the existing credit. The tax credit then stepped down to a 26% credit in 2020 and will step down again to a 22% credit in 2021. Starting in 2022, the residential tax credit is scheduled to be eliminated, and the business tax credit is scheduled to continue at a 10% rate.
Additionally, there is also a “commence construction” clause which allows those claiming the business credit to reserve the tax credit percentage amount in the year the project was started, rather than when it is completed, in some cases. For example, this might allow a business to start construction on a solar project in 2020, complete it in 2021, and still be able to claim the 26% tax credit in 2021 tax year.
What Does This Mean for YOU?
These changes give you and I some certainty when planning for purchasing and installing a solar array system. However, in order to take full advantage of these tax benefits and to get the best return on your project you must act now!
Contact us today to find out more about these changes to the tax code and how you can leverage them to make your business stronger and more competitive, or to make your home a more self-sustaining place with fewer monthly costs.