End of 2020 Signals a Drop in the Solar Investment Tax Credit

Home / Blog / End of 2020 Signals a Drop in the Solar Investment Tax Credit
End of 2020 Signals a Drop in the Solar Investment Tax Credit

In 2005, the U.S. federal government gave the solar industry plus everyone who wanted to take advantage of this clean, renewable energy source a gift: the Energy Policy Act of 2005. This act created the original solar tax credit of 30% to offset the cost to install a solar panel system, be it commercial or residential.

The solar Investment Tax Credit (ITC) was originally supposed to expire in 2007, but its popularity and success at expanding the commercial and residential solar industries led it to being extended to the end of 2008. The tax credits continued to get extended until 2015 when Congress, in a rare by-partisan action, implemented a more formal schedule for the tax credit. This version included a tax credit for the cost of installation that stepped down over time. Here’s the deal:

  • 2016 – 2019: The tax credit of 30% of the cost of the system.
  • 2020: Tax credit dropped to 26% of the cost of the system.
  • 2021: Tax credit continues to drop, this time to 22% of the cost of the system.
  • 2022 onwards: Owners of new commercial solar energy systems can deduct 10% of the cost of the system from their taxes. There is no federal credit for residential solar energy system.

The net result was one of the most clean energy policies in U.S. history, one that has helped the industry grow by more than 10,000% since it was enacted in 2006. In other words, this single piece of Republican and Democrat-supported legislation led to massive adoption of clean, renewable solar energy across both the commercial and residential markets. That is exactly the type of bipartisan, job-creating, planet-protecting legislation we the people want out of Washington, D.C.

Am I right?

So here we are on the verge of 2021. The investment tax credits are still in place for commercial solar installations. If you purchase and are in the process of installing a commercial solar system at your business, manufacturing plant, retail establishment, farm or privately held water treatment facility, you can claim a deduction of 22% against the cost of installation on your 2021 taxes. And Solential will help you take advantage of it. Then, from 2022 onwards, owners of new commercial solar energy systems can deduct 10% of the cost of the system from their taxes. That is, unless Congress acts to extend or even improve the solar Investment Tax Credits.

Before the COVID-19 recession, solar companies added more than 150,000 U.S. jobs over the last decade, growing five times faster than the overall economy over the last five years alone. An untold number of businesses, including giants like Amazon, Target, Walmart and others, added solar energy to power their operations. With more time and tax credits to recover COVID-19 related losses, the solar economy can create jobs again and continue to keep America on the clean energy path.

As you can see, I am passionate about this issue. Clean energy is not a political issue. Instead, it’s about continuing America’s energy independence and clean renewable solar energy plays an integral role in this equation. Fortunately, there are other funding mechanism for commercial solar such as grants and solar investors. I would love to share all of your options with you. Please connect with me, Corey Miller, at Solential at cmiller@solential.com or call/text me at 317-627-4530. I would love to chat with you and explore your commercial solar options.