What is a Solar Investment Tax Credit?

If you’re looking for ways to become more environmentally friendly, then going solar is a great option. Many people will often shy away from it, as the cost of solar installation can drain the wallet and make it feel like you’re paying more money for fewer benefits. That is where a solar investment tax credit comes into play.

Here’s everything you need to know about the solar investment tax credit and why you need to act fast.

What Is the Solar Investment Tax Credit?

The solar investment tax credit is a federal tax credit. Federal tax credits are designed for your federal tax to be reduced when it comes to paying income tax.

This works on a 1:1 basis. So if you have a tax bill of $5,000, but you have a tax credit of $5,000, then you would effectively have no tax bill.

The solar tax credit helps recover the cost of installation by reducing your federal tax bill. Currently, you can claim 26% of your solar cost on your tax bill with no monetary limit.

There are other states that have state-level tax credits. In these instances, you are aiming to lower your state income tax bill.

You can have both a state tax credit and a federal tax credit, but you’re not able to claim the full amount when it comes to federal tax credits. 

When Does the Tax Credit Run Out?

In 2020, the solar investment tax credit was given an extension as part of the stimulus package. While it was meant to run out in 2020, you now have the end of 2022 to maintain that 26%.

In 2023, the rate will drop down to 22% of your total solar cost. Unless the current administration extends these tax credits.

In 2024, residential solar credits will end and there won’t be any available on a federal level. You will still be able to write off 10% if you install solar panels for commercial usage.

Who Qualifies for Solar Tax Credits?

Anyone that owns a home, leases a home, or other properties can qualify for this tax credit. So if you recently bought a home and want to get solar power, you’re more than welcome to.

Now, say you own a rental property down in Florida, you are still able to write off that 26%. The tax credit incentivizes people to adopt solar on a mass scale. So if you own property, whether it is residential or commercial, you can install solar as much as you want to.

If you own property in Illinois, then be sure to check out https://blueravensolar.com/illinois/.

Act Now Before It’s Too Late

The solar investment tax credit is not going to stick around. While the Biden administration is looking into ways to continue these credits as part of their climate initiatives, there is no solid plan.

If you fancy other ways of going green, like wind power, then see if they offer any tax credits for that method.

If you want to learn more about the benefits of going solar, then be sure to check out the rest of the blog. Know someone interested in solar? Share this article so they know what they can write off.