The 2020 Solar Tax Credit is a great incentive to homeowners for installing solar energy systems. The federal program provides homeowners with a 30% credit for the cost of solar energy systems, which can be up to $3,000 in total by 2022.
All residential and commercial property owner who install a solar panel during the year are eligible for a tax credit. This is a once-off credit that you can use to offset your tax for the year in which it was received. It may also be carried over into subsequent years.
What is a Solar Tax Credit?
The solar tax credit, which is also known by the name Investment Tax Credit (ITC), allows a 30% reduction in tax for both residential and business properties. It is a valuable incentive which has driven the solar industry to grow more than 200x over the past decade since it was introduced in 2006.
How Does ITC Work?
The ITC may be used for a variety of solar projects. These include residential systems that are installed by the customer, as well as large-scale solar farms. The tax credits are worth 30% of the net cost for a solar installation and can be extended as long as there is a program in place.
What Are the Qualifications to Claim the Tax Credit?
For you to qualify for the ITC, your solar system must be fully installed and operational before the year 2022. This is applicable to both commercial and residential properties. Commercial properties can qualify more easily because of a "safe harbor" provision.
How much is the Solar Tax Benefit for 2020?
The total solar credit you'll be eligible to claim for the 2020 tax year is calculated by taking the net cost of your system, which includes any costs incurred before it was installed, and dividing it by the average price of electricity in your area over the past 12 months. This figure is reduced by your tax bill, giving you credit for the excess.
What are the ITC Qualifying Projects?
Qualified projects are generally those with a minimum capacity of three kilowatts. The batteries can be standalone and not attached to the solar system.
How does the tax credit carryover work?
You can carryover any excess tax credits you're due when you're applying for the ITC. This is an advantage that many taxpayers enjoy.
What Are the Commercial ITC's Benefits?
The solar production tax credit is available to commercial property owners in addition the ITC. This is a credit that pays for the labor and materials needed to make solar products or systems.
In fact, it's even possible to use the tax credit for your energy storage equipment as well, if you're going to be adding batteries to your solar panels in the near future. The tax credit can be worth up to 30% of the cost of an entirely new battery with a minimum capacity of 3 kWh.