Congress has passed, and the President has signed, the new appropriation bill into law that also extended the 26% Investment Tax Credit (ITC) through the end of 2022. The Federal ITC has been in place since 2005 and has played a major role in the adoption of solar energy across the country. The credit has allowed homeowners and commercial entities to reduce a significant portion of the cost of their solar system installation from their income taxes, which made solar more affordable. Not to be confused with a deduction, the ITC is a CREDIT on one’s federal taxes. THIS MEANS YOU SAVE MORE MONEY! With a standard deduction you only garner the benefit as a fraction of the deduction amount. But with a tax CREDIT, you get dollar for dollar, 100% of the tax credit back to you.
Example: if you list a $6,000 dollar deduction on your tax return and you are in the 20% tax bracket, you receive a $1,200 reduction in your taxes. With the ITC CREDIT, you would receive the full $6,000 reduction in your taxes.
The residential and commercial solar ITC has helped the U.S. solar industry grow by more than 10,000% percent since it was implemented in 2005, with an average annual growth of 50% over the last decade alone.
How does one qualify for the ITC?
For homeowners, the requirements to qualify are straight forward. You can always claim your federal solar investment tax credit (ITC) for up to 26% of the total cost of your solar panel system on your federal incomes taxes. The year in which you install your solar panels is the year you can benefit from this tax credit. Plus you can use that credit over three years if you need to. To make it easier for you to understand, the tax credit you collect from your solar installation is the amount your federal income tax will be reduced by.
The best part is… there are no limitations to how much tax credit you receive!
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