2020 Solar Federal Tax Credit

Feb 20, 2020

Solar Panels

The Federal Solar Tax Credit or The Federal Investment Tax Credit “ITC” was passed under the George Bush administration via the Energy Policy Act of 2005. The ITC was created to facilitate the adoption of clean energy and provided authorization for tax credits among other energy and tax provisions.

Solar Tax Credit Step Down

But, this Solar Federal Tax Credit is scheduled to decrease every year starting in January 2020, the tax credit will drop to 26% from the original 30%, and in 2022, the residential portion of the Solar Tax Credit will be eliminated entirely. Only 10% of the Tax Credit will remain for commercial and industrial projects only.

How Big Of A Difference Is A 26% Tax Credit Versus a 30% tax credit?

The Federal Tax Credit is applied to your solar system cost, the amount you receive is dependent on the amount of solar system you are purchasing. A bigger system, a bigger credit.

Example:

Year        Gross Solar Cost        Credit %        Credit Amount         Net Solar Cost

2019            $20,000                  30%                       $6,000                     $14,000

2020          $20,000                   26%                       $5,200                     $14,800

How To Claim Your Tax Credit?                                                                                          

While we do not offer tax advice, please speak to your tax preparer, the  IRS Form 5695 will come in handy for filing your taxes.  Please note, you will receive your tax credit the following year when you file your taxes for the year in which you installed your panels if you don’t qualify for the entire tax credit in the first year you can rollover the amount over 5 years.