It’s a new year with a blank slate and boundless opportunity stretching before us, right? It’s only natural that my thoughts should turn to spring. How long I can keep up my resolutions? Planning my next house project? Nope, it’s . . . taxes! Taxes? Really?
At issue is the Federal Renewable Energy Tax Credit, also known as the Investment Tax Credit (ITC). For years, homeowners who purchased a solar energy system enjoyed a 30% ITC to help offset the cost of the system. It works like this: purchase and install a solar panel system on your home and receive 30% of the cost of the entire system (including parts and labor, after state and local grants) as a credit back to you when you file your federal taxes, up to the full amount of taxes you owe. If you don’t owe enough in taxes to get the full credit this year, you can “roll over” the remaining amount into future years as long as the credit is still in effect.
For example, if you spend $30,000 installing a solar array on your home, your ITC would be 30% of $30,000, or $9,000. If you’ve paid $9,000 or more in taxes that year, you’ll get a $9,000 refund check when you file your taxes, so the net cost of your system would be $21,000. (If you only paid $6,000 in taxes in that year, you would have $3,000 in “credit” that you could claim in a future year.) Pretty nice, considering you’ll also be saving money on electricity for the next couple of decades.
More good news?! (Yes, please!) Both homeowners and businesses can combine the ITC with any other rebates or incentives to further reduce the cost of the system. For instance, if your local utility offers a rebate, you can take the full rebate plus the ITC – in some cases, reducing the cost of the system by 50% or more!
Here’s the catch: 2019 is the last year homeowners can take advantage of the full 30% tax credit. After this year, the ITC will begin to shrink – to 26% in 2020 and 22% in 2021 – and will be gone completely in 2022. This applies to residential solar installations only. Commercial solar installations will still receive a 10% ITC from 2022 forward. (Check out this fact sheet on the ITC from the industry trade association, Solar Energy Industries Association: https://www.seia.org/sites/default/files/inline-files/ITC%20101%20Fact%20Sheet%20Feb18.pdf).
On top of taking full advantage of the ITC while it lasts, remember that solar has never been cheaper, despite all the talk of tariffs. I’ll talk about that, and how solar can be a better investment than the stock market, in my next post. In the meantime, make the call to go solar today and go green in more ways than one. See my video on the subject here:
Jeff Wilson has hosted nearly 200 episodes on HGTV, the DIY Network, and PBS. His book, The Greened House Effect (https://www.chelseagreen.com/product/the-greened-house-effect/) follows the deep energy retrofit of his family’s 75-year-old home to reduce their energy bills by over 90% while making the home a more comfortable, healthier place to live. www.jeffwilsonregularguy.com.