The solar income tax credit (also known as PTC) was first introduced by the Federal government in 2006. Since then, home owners have consistently enjoyed tax deductions sponsored by the government to offset costs of installing solar power systems on their properties.
In fact, all was good until the 1st of January 2020, as home owners could claim 30% of the installation cost as deductions while filing their taxes, and they had a two-year period to carry over this credit. But this has changed significantly this year, and here are the major highlights.
- The tax credit has been reduced to 26%, still allowed over a 2-year deduction.
- This credit is expected to further reduce, and perhaps even go away altogether for residential buildings, in 2022.
Here, we study how these changes still imply an optimistic and sunny atmosphere for the future of the solar industry.
- The time to embrace solar in your property is now!
If you haven’t installed a solar power system in your property yet – residential or commercial – you now have multiple reasons to finally act on it and put it together for this wonderful year of 2020, when costs are still low and the fed government still sponsors a part of your solar investment through tax credits.
- Consistently reducing costs ensure installations increase every year
Yes, this seems to be an ongoing affair. In fact, did you know that solar panels are perhaps at their cheapest best at the moment, having gone through a whopping 70% reduction in just the past decade? This also means that the technology has significantly evolved and matured, so you are assured of more bang for your (lower) buck. Cool!
- Added push to avail existing tax incentives in next two years
If you are considering deferring solar power installation on your property to next year, when perhaps they may be even more cheaper – also consider this. The 26% ITC rebate may well disappear in 2022. This means that you only have this year and the next to claim it. Considering that the average solar roof system (for a 6 kilowatt household) can cost $15,000, most tax payers do require 2 years to claim this credit.
Yes, you can defer to next year and avail the cheaper panels, but you may no longer have the option to roll over any unclaimed amount (over 26%) to the next year (2022). This is worthwhile enough to consider a solar investment, this year.
- Quicker ROI for business owners
With the 26% ITC also applicable for business owners the next two years, the total cost of their solar power installation is likely to reduce. This means that they can naturally expect quicker returns on their solar investment, provided they act now while the rebates are still available.
Industry experts predict 2020 to be the year of embracing solar power. It is not all downhill from there though, as post 2022, experts claim that individual states will take on a bigger role in managing solar incentives and rebates, in order to adequately meet their yearly Renewable Energy Credit (REC) goals. As Greta Thunberg succinctly put it, “Change is coming, whether you like it or not”.