Government legislation is focused on increasing the viability of solar and working with utilities to create a sector that supports renewable energy and creates more jobs. Currently, we have time sensitive federal tax incentives that are advantageous for organizations to get involved in a solar project now, but they may not last. Let’s talk about the Federal Investment Tax Credit and what it does for companies purchasing a solar project right now. Companies can write off 26% of the total cost of their solar installation through a federal tax credit if installed before 2020.
The Investment Tax Credit (ITC) is a 26% tax credit for solar systems installed by December 31, 2020. However, remember that 2020 is the last year to qualify for this discount of 26%. The tax credit will then reduce incrementally each year until settling at 10% in 2022 and for future years. Companies are seeing the huge potential for savings on their power bills and understanding the imminent change in incentives, they are making moves sooner rather than later. If the tax credit decreases at the end of 2020, businesses will lose substantial financial benefits in write offs on their solar installation costs.
However, there are new potential regulations on the horizon that may extend federal incentives existing thresholds and add new ones for as long as five more years. Last week, the House Ways and Means Committee introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act as a part of the $1.5 trillion House infrastructure package released earlier last week. Although this act has not passed, it would equate to huge continued incentives for businesses to go solar. The bill includes direct pay and outlines a 5-year extension of the solar Investment Tax Credit (ITC) at 30% through 2025, followed by a two-year step down period. The step down would begin in 2026 at 26%, move to 22% in 2027 and then drop to 10% for commercial and utility-scale solar projects and 0% for residential solar in 2028. The legislation also creates an investment tax credit for energy storage and includes an additive measure that would increase the value of the ITC by 10% for companies that meet certain labor requirements.
These regulatory proposals, if approved, will have a massive positive impact on the solar sector. This is because the federal government understands that the solar industry has great potential for creating new jobs and helping to lead America’s recovery during this unprecedented time. However, they are not passed yet and as of now, the 26% tax credit is still time sensitive with only six months left to qualify. The ITC, together with other incentives, are currently an astronomical advantage for businesses and property owners when making the decision to go solar.
Contact Louth Callan Renewables at 860-814-4379 to secure the federal tax incentives for your solar project and learn more about how they can save you money.