With governments worldwide shifting their focuses to a more sustainable future, solar technologies and their federal incentives have grown.The U.S. federal solar tax credit was enacted in 2005. Since then, the U.S. solar industry has grown by over 10,000 percent, averaging an annual growth of 50 percent over the last decade. Lets look at the worth of the federal solar tax credit in 2022.
What is the federal solar tax credit?
The federal solar tax credit, also known as the investment tax credit (ITC) has two prongs: commercial and residential. It was created to increase solar technology use in the U.S. by offsetting the initial cost of the expensive technology. Since its establishment by the Energy Policy Act of 2005 it has gone through many extensions and variations. In 2016-2019 the tax credit was worth 30 percent of the system, in 2020-2022 it was worth 26 percent of new systems, in 2023 it will be worth 22 percent of new systems, and in 2024 it will be worth 10 percent of new commercial systems.
The tax credit can cover the cost of solar panels, labor costs, permitting fees, inspection costs, developer fees, inverter costs, sales taxes and more. It can be used in combination with other solar incentives such as rebates from the state, state tax credit and renewable energy certificates (RECs).
How much is the federal solar tax credit in 2022?
The federal solar tax credit in 2022 will deduct 26 percent of the cost of an eligible system system. This number applies to both eligible commercial and residential projects. To be eligible, you have to be the owner of a solar energy system that is subject to federal income taxes in the U.S. or its territories. However, this doesn’t mean the you have to have enough tax liability to claim the entire credit within one year. Remaining credits can “roll over” into future years if the tax credit is still in effect.
To be eligible for the tax credit your solar photovoltaic (PV) system must also be installed before December 31, 2023 and must be new or being used for the first time.
Want to take advantage of the federal solar tax credit?
With the tax credit dropping at the end of this year, now is the perfect time to install a solar system. If you would like to take advantage of the federal solar tax credit in 2022, partner with EnergyLink. Our team of experts will design, build and fund a custom solar project that fulfills your company or organization’s unique needs. To get started, click the button below for a free quote. To speak with a team member directly, call (866) 218-0830. If you would like to learn more about the federal solar tax credit in 2022, click here.