Solar Tax Credit Extended: Act Now

In December 2020, Congress passed an economic stimulus package to help relieve the impact of the COVID-19 pandemic. Included in that package was a two-year extension to the federal solar Investment Tax Credit* (ITC). Originally set to phase out in 2022, the ITC is now available until 2024. That may seem like a long way off, but if you want to take full advantage of this tax credit extension, now is the time for action. 

What Is the Investment Tax Credit (ITC)?

The Investment Tax Credit (ITC) is a federal tax credit for a percentage of the purchase cost of a solar energy system. Systems installed from 2020 through December 2022 receive a 26% credit. Energy systems installed January 1, 2023 through December 31, 2023 will receive 22%. The federal policy will end January 1, 2024 unless it is once again extended. This tax credit will offset taxes owed when you file your federal return. If your ITC is larger than the amount you owe on your federal return, you may be able to roll over the remainder of your ITC to the next tax year or receive the balance as a refund.

Eligibility Requirements for Northern California Homeowners

The ITC is only available to those who own (not rent) their home and purchase (not lease) their solar panel system. All federal and state tax credits, rebates, and incentives go to the owner of the system.  While not typical, there are some lease agreements that make an exception to this. Be sure to check your lease agreement before assuming that you’re ineligible. 

The solar system must be new; the tax credit is only good toward initial or original installation costs and materials. The system must also be located at your primary residence (or owned business). 

However, if you add a second system, with “new” hardware, you still get the tax credit. Also, if you add a new battery system to an existing PV system, and the battery is charged 75% or more from PV, you also get the tax credit on the new battery.

Tax credits are subject to limitations, so it is important to meet with your tax preparer to determine if you pay enough federal tax to qualify and to see how this credit can best be applied to your tax return. If you file your tax return yourself, make sure that you consult the IRS rules regarding federal tax credits before filing. Most online tax return software includes the IRS Form 5695 needed to file for this federal credit.

Don’t Wait, Act Now

In order to make the most of the ITC, your solar energy system needs to be installed and producing power by December 31, 2022 for residential homes. Businesses, however, can secure the tax credit now and then, in a future year, when the system becomes operational, they can still receive this tax benefit. 

Synergy Power’s services, as well as those of our competitors here in Northern California, are booked out months into the future. While the credit is available through the end of 2023, you won’t receive the full benefits of the credit if you put off making the call. Don’t wait, contact us now to book your installation as soon as possible.

*Tax Credits are subject to change with legislation changes.

Contact Us Now