Created in 2005, the solar ITC was made to help grow the solar energy industry. The growth that followed lead to multiple extensions, including the final one in 2015 that drew the line at 2021. While there are other incentives available when going solar, this is deemed the “most important.”
The solar ITC was designed to decline throughout the years, as the industry grew. However, in 2022 the tax credit has been lifted:
"The business investment tax credit is extended and lifted to 30% for projects that have started or start construction before the end of 2024 and the credit becomes available to stand-alone storage. Solar also becomes eligible for the production tax credit which is currently at $0.026/kWh for 2022 and rises with inflation. After 2024, the credit transitions to a "tech neutral" structure. "
The personal income tax credit for the installation of solar energy property is extended and raised to 30% with the step-down beginning in 2033 when it drops to 26%.
The total cost of your solar installation is $18,000 and you receive a utility or state incentive of $1,000 and an ITC rebate of $5,400; for a total incentive of $6,400. If you were to calculate the 30% ITC:
30% x $18,000 = $5400 tax credit that you can utilize as payment for your taxes to the IRS.
The incentive will be calculated on the gross installed cost of the solar project if you’re a business; the gross cost being calculated prior to deducting any local or utility incentives. The state tax incentive for commercial is 10% with a cap of $25,000 per system.
30% x $250,000 = $75,000 tax credit that your business can utilize as payment for Federal businesses income taxes.
The solar investment tax credit applies to anyone who purchases their system outright. If you own your system, you are eligible.
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*Please verify all information regarding the ITC with your tax representative as we are not tax attorneys.
Sources: https://www.seia.org/sites/default/files/2022-08/Inflation Reduction Act Summary PDF FINAL.pdf