The Federal Investment Tax Credit (ITC) for solar energy system installation on your home or business is a huge financial boost to those who care about renewable energy - it gives you a tax rebate of 30% off the costs of purchasing and installing your solar system!
At Sun Solar Electric, we not only can help you decide on which type of solar panels and other system elements to invest in, and then take care of the installation process for you; but we also always help each customer to take advantage of all available incentive programs and rebates - plus, the Federal Solar Energy ITC. We can explain to you the details of how ITC tax credits work and give you a very close estimate on how much you're going to save. We can give you that information both before and after you select your solar products and have them installed, to help facilitate easy budgeting and future planning.
Sun Solar Electric has been improving energy efficiency and eco-friendliness in homes and businesses of Sonoma, CA, and surrounding counties of the SF Bay Area for many years and has already made a big impact on reducing our region's collective carbon footprint. We can help you save as much money as possible as you work to upgrade your building's energy efficiency and reduce dependence on fossil fuel based energy sources. Contact Sun Solar Electric today by calling 707-280-7410for a free, no obligation consultation, a free quote, and answers to all of your solar energy related questions!
What Exactly Is the Federal Solar Energy ITC Program?
Since the Federal Investment Tax Credit (ITC) was passed in 2005, home and business owners alike have had federal subsidies available to make installation of new solar panels, accompanying equipment, and other renewable energy systems much more affordable. The basic fact about ITC is you can get a federal tax credit equivalent to 30% of the total costs of purchasing solar energy equipment and installing it on your property.
Originally, ITC was only to continue until 2007, a mere two years. But it has been extended again and again, the most recent extension being passed in 2015 and extending the program through 2021.
Presently, the tax credit is at 30%. But there is a scheduled "weaning" off of federal subsidies planned in the most recent bill passed concerning ITC. The tax credit will reduce to 26% in 202, to 22% in 2021, and in 2022, it will go down to 10% for businesses but there will be no ITC for homeowners (unless, as has often happened in the past, ITC is again extended.)
Also, in the past, owners of newly installed solar energy systems had to have a "fully operable" system in place before claiming the ITC benefit, but under current rules, you can claim it as soon as your system has been installed and/or constructed.
How Does the Federal ITC Program Work?
There's more to know about the Federal ITC program than just the number 30. First of all, you have to qualify for the program. If you are leasing your solar panels or are buying them gradually through a PPA (solar power purchase agreement), then you won’t' qualify for the ITC credits.
That's not necessarily a bad thing, however, because a lease or PPA plan might be your best option in some situations - and most companies doing a PPA or leasing your panels to you will pass on at least some of the savings of the Investment Tax Credit, which that company will be eligible to receive directly. But for everyone else, everyone who simply buys their solar system and pays to have it installed, you will indeed qualify for the ITC benefit.
How do you go about taking advantage of the ITC? We at Sun Solar Electric can assist you in doing that. But basically, you claim the tax credit when you file for federal income taxes using IRS Form 5965 (to prove eligibility) and then add relevant information on your 1040 as well. You can simply tell your tax accountant, if you use one, you'll be claiming ITC this year, or we can give you further information on how to make the claim.
Note that this is a tax credit, not a tax deduction. And this is to your benefit. A tax deduction just lowers your amount of taxable income that year, while a tax credit gives you a certain amount of money that is subtracted from your actual owed taxes. And if you owe less in taxes than the total value of the tax credit, you can just use part of it one year and part of it the next year - thus pay zero taxes in year one and discounted taxes in year 2!
Now, you may be wondering if you can just get the $3,000 in cash from the IRS if you don't owe any taxes that year. Unfortunately, the answer is "no" because the tax credit is not designated as "refundable." But, you can use it in pieces across as many as 5 tax returns since you can claim it/part of it for up to 5 years after installing your solar system.
Calculating the ITC Tax Credit
There are some important facts you need to know about how to calculate your ITC benefit when you file your federal tax return. It works differently for homeowners VS business owners. Those who install solar panels on their own homes must first subtract state incentives and local utility rebates to arrive at their "net" installation costs, and then calculate 30% of that number. On commercial properties, it goes by the "gross" installation costs. So, businesses don't have to subtract any incentive and rebate savings first before multiplying by 30%.
That obviously gives a bigger tax credit to businesses, which immediately may strike you as unfair. But there's a reason for this. It's because those rebates and incentives are considered "earned income" and thus taxes when it comes to businesses but are considered "discounts" and thus not taxes when it comes to homeowners.
So, while businesses get a bigger ITC, they also pay more taxes on solar system installation before the ITC kicks in. With homeowners it's the reverse, but it works out about the same.
Benefits of The Federal ITC Program
The single biggest financial cost savings program to home and business owners who choose to "go solar" is the federal Investment Tax Credit discussed above. Whether you are paying cash for a new solar system or rolling its purchase into a home equity loan or regular mortgage, you will save 30% on the cost of solar panel installation via ITC. And even if you don't qualify for ITC because you're on a PPA plan or leasing your solar system, you likely get all or a part of this 30% cost savings passed on to you.
Thus, you can benefit from ITC either directly or indirectly. And since a new California law has required most new construction in our state to be built with solar panels installed on the building or on the property, the importance of the ITC tax credit is even greater for Californians - especially if they plan to buy a brand new home or business property in the near future.
Partly because of ITC, there has been a big boom in roof top and other solar panel installation in California and throughout the United States. The extensions to the program have prolonged this boom, and will prolong it, it seems, at least until 2022. After the 2015 extension, for example, solar industry jobs jumped by 25%, and there was a correspondingly high bump in new panel installations. That kind of trend will likely continue for the next 5 to 10 years or more. This is a great time to install a solar system! And you don't want to wait till the ITC benefit reduces and eventually (perhaps) ends over the next several years and miss out on the benefits.
But also consider how much the ITC bill and its extensions have caused renewable energy to bloom in the US and thus other sources of energy to be used less than they would have been. The industry, home and business owners, and the environment are all being benefited.
Counting the Costs of Solar Energy
Solar energy is free in one sense - there's no tax on sunshine and no work required to keep the sun shining. It's a constant, renewable energy source that will continue as long as there is life on this planet - because we can't live without it! But, effectively and efficiently harvesting the sun's energy does, of course, require work and cost money. Most solar systems cost somewhere in the range of $15,000 today, including parts and installation. That number can be much lower or higher, though, depending on how big of a system you use and which kind.
Different brands and models of solar panel and system equipment also have different price tags on them, different levels of efficiency when used, and different applications where they make the most sense to use. We at Sun Solar Electric can give you multiple different estimates on building and installing your new solar system, based on different possible ways you could have it done. We can explain to you the cost to benefit ratios of each choice as well as how your building's structure or location might impact these choices.
We also are quick to get you every possible state and local incentive or rebate possible and to help you sell back solar power to your electric company to save even more money. But without a doubt, helping you sign up for the Federal Investment Tax Credit is one of the main ways we at Sun Solar Electric minimize your costs for your new solar system.
Eventually, your solar panels should more than pay for themselves and save you money on every electric bill. But also remember that it's hard to quantify the value of saving the environment from damage by using renewable energy sources.
Why Choose Us?
Sun Solar Electric has deep experience in every aspect of the solar panel and solar system installation industry. Our staff has decades of combined experience and we are familiar with every type of solar panel on the market today. Our team puts the highest level of workmanship into all of our services. We install your system for optimal power production and durability and in full accord with manufacturer's recommendations (to preserve your product warranties.)
Sun Solar Electric can help you design your solar system, choose the best location for it on your property, flawlessly install it, give you detailed instructions on how best to use and maintain it, and assist you in qualifying for multiple incentive programs, including ITC. We have a strong track record of service among communities in the San Francisco Bay Area, and we are the go-to solar electric company in Sonoma, California, and beyond. We keep ourselves affordable and available to serve you year-round.
Contact Sun Solar Electric Today to Learn More About the Federal ITC Program!
At Sun Solar Electric, we are on top of all recent changes in the solar energy market. We know how to guide you in selecting the best products, and we know how to optimally install them for best performance and longevity of productive use.
We also understand that installing solar energy systems on your property is not cheap. It can save you money in the long run, but it's a significant expense upfront. Therefore, we are also specialists in helping you save money through the Federal Investment Tax Credit (ITC) for new installations of solar energy systems.
We know how to get you your maximum savings through ITC as well as state and local incentive programs and rebates.
Contact Sun Solar Electric today by calling 707-280-7410for a free solar energy consultation and more information on ITC!
We serve Sonoma, CA, and all the surrounding counties of the SF Bay Area.