For many people, one of the biggest motivators to invest in solar energy is the abundance of tax incentives available. Beginning in 2020, this tax incentive will decrease, but that doesn’t mean you’re without savings.
Here at GreenLife Technologies, we’re focused on delivering an all-encompassing experience for our clients when they switch to solar energy. This means we do more than simply install your solar panel system. While we certainly do this, we also answer all your questions, give you information about local discounts and financial breaks, and keep you informed about national tax incentives for installing a solar panel system.
In today’s blog, we’ll discuss the recent tax changes that could affect you in 2020 and for years to come. Keep reading to learn more, and contact us today for a free consultation on a solar panel system in East Texas.
What Is the Investment Tax Credit (ITC)?
The investment tax credit (ITC) is also known as the federal solar tax credit. It allows you to deduct a certain percentage of the cost of installing a solar panel system from your federal taxes. Sounds pretty good, right? It gets better: it applies to both residential and commercial solar panels and there is no maximum ap on its value. Couple this with the fact that the cost of solar energy is rapidly decreasing across the nation and not just within Texas, and you’re looking at savings in your pocket.
How ITC Works
You are eligible for the investment tax credit for your solar panel system as long as you do, in fact, have a solar energy system. As long as the tax credit stays in effect, you can also “roll over” the remaining credits into future years if you don’t have enough tax liability to claim it all in one year.
Tip: Signing a lease or PPA doesn’t allow you to claim this tax incentive since you are not the owner of the solar panel system in this situation.
How to Claim the ITC
When you file your yearly federal tax return, you can claim the ITC. If you work with an accountant instead of filing yourself, make sure to let them know you’ve installed a solar panel system in the past year.
The ITC Through the Years
The ITC was originally established through the Energy Policy Act of 2005 and was scheduled to expire at the end of 2007. Congress extended its expiration date multiple times, bringing us through 2019 with a 30% tax credit for the cost of the solar panel system.
- 2016–2019: 30% of the cost of the system
- 2020: 26% of the cost of the system
- 2021: 22% of the cost of the system
- 2022 and on: 10% of the cost of the system
As you can see, 2020 and 2021 still offer a substantial tax deduction for the cost of your solar panel system; however, beginning in 2022, this tax deduction will drop to 10%. While this is still significant (especially as solar energy becomes less expensive), this is a huge drop in the ITC.
Financial Benefits of a Solar Panel System
Solar energy has many benefits, not the least of which is more money in your pocket! Here at GreenLife Technologies, we aim to educate our clients throughout East Texas of the many benefits of switching to alternative energy. Check out 5 Non-Financial Benefits of Using Solar Energy and 5 Financial Benefits of Using Solar Energy for more information.
Though the tax incentives may be decreasing, you’re not without luck. The cost of solar is decreasing rapidly, the ITC will still benefit you immensely, and your utility bill will decrease significantly before your eyes. With a payback period of just six years in East Texas for solar panel systems, there’s no time like now to invest in solar energy.
Let GreenLife Technologies Help You Today
Whether you’re interested in an off-grid solar system, a grid-tie solar system, or a grid-tie with a solar battery backup, GreenLife Technologies has you covered. We’ll help you from the initial consultation to the moment you have more questions about the ITC. Contact us today to get started with a free consultation on solar panel systems in East Texas.