With the signing of the December 21, 2020, COVID-19 relief package (page 2439), the Federal Solar Tax Credit (Solar Investment Tax Credit – ITC), initially set to expire at the end of 2021, has been extended through 2023. Initially, in the final year (2021) of the ITC, the Federal Solar Tax Credit was set to drop to 22%. With this extension, the 2020 tax credit of 26% has been extended through 2022, dropping to 22% in 2023 for both residential customers and business owners. Barring any further extensions, 2023 will be the last year for residential customers to receive a Federal Solar Tax Credit, with business owners qualifying for a 10% credit in 2024.
Initially enacted in 2005 as the Energy Policy act of 2005, the ITC is credited as one of the main factors in the growth of solar energy in the United States, with an annual solar growth of 52%. A Solar Investment Tax Credit has been a bipartisan issue, with members of both political parties pushing for an extension, and this just may be the beginning. The original Federal Solar Tax Credit was set to expire in 2007, with the popular program’s success leading to multiple extensions in 2007, 2008, and 2015. With this history, the new Biden Administrations plan for a “Clean Energy Revolution,” combined with the Solar Energy Industry Association (SEIA) “Solar Vision” 100-day agenda. The likelihood of even more sweeping Solar Investment Tax Credits to encourage homeowners and businesses to invest in solar is relatively high.
Any home or business owner can claim the Federal Solar Tax Credit if they purchase their solar system, and you owe income taxes to the federal government the same year as your installation. Since this is a “credit” and not a “refund.” Your credit can not be larger than the amount of taxes you owe. However, you can file the credit over multiple years, with unused credit rolling over to the subsequent year.
(Please note, the ITC is a “Tax Credit,” not a “Tax Refund.” For information on filing for your tax credit, please consult a tax professional.)
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