The Federal Investment Tax Credit allows solar customers to save a significant amount of money on their taxes, and is one of the main reasons that solar power is an affordable investment. Often referred to as the Solar Tax Credit, this incentive is available to all residents and businesses that have taxable income.
A tax credit is a dollar-for-dollar reduction on your taxes. If you owe $10,000 in Federal taxes and have a $3,000 tax credit from your solar array installation, you can apply your credit and reduce your Federal taxes to $7,000 for the year.
Essentially, a tax credit allows you to take money that you would normally owe to the Federal government and instead invest it in an asset for your farm or business. This year, the Solar Tax Credit is worth 30% of the cost of a solar array.
2019 is a very important year for the Solar Tax Credit because it’s the last year to claim the Credit in full. In 2020 it starts to phase out, or “sunset,” which is a term often used to describe the gradual closing period for a public policy.
Timeline for the Federal Investment Tax Credit
Once 2023 hits, residential installations will no longer be eligible for the Credit. For commercial entities like businesses and agricultural operations, it will remain at 10% as long as the legislation which supports it is renewed.
Ways to Apply the 2019 Solar Tax Credit
Once you’ve claimed the tax credit, you have a few options for how you want to apply it. The Credit can be used all at once or distributed over multiple years. Businesses have a 20 year period to use the Credit, homeowners have 5 years. Also, previous year’s taxes can be amended to best take advantage of your Credit (this will require additional work by your certified tax professional).
While you have valuable flexibility in how you spend your tax credit, there’s an important rule about claiming the Credit which is set in stone—you can’t claim it until your array is installed. To receive the full 30% tax credit, your array has to be installed by the end of 2019.
This rule makes 2019 the most important year yet for the Solar Tax Credit.
The Solar Tax Credit has been available for more than ten years, which has spurred exponential growth in the solar industry. It’s even helped drive installation and equipment costs to an all-time low.
For all the aforementioned reasons, we expect a rush of installation requests for every solar installer this year. Customers that move to purchase earlier in 2019 will have no trouble receiving the full 30% tax credit, but last minute purchases, in such a busy year, may not get scheduled in time to be installed by the end of 2019. That means late installations could be stuck with a smaller tax credit.
The Sky’s The Limit With The 2019 Solar Tax Credit
Installations of any size can take full advantage of the Solar Tax Credit because it has no cap. Some tax credits have a limit to how much they can be worth. For example, if a 20% state tax credit caps-out at $20,000, then any installation over $100,000 will be limited to a $20,000 tax reduction. With the 2019 Solar Tax Credit, you’ll receive a credit worth 30% of the cost of your installation, no matter how big it is.
What If I Don’t Have Taxable Income?
Non-profits, religious organizations, and other entities that don’t have taxable income are not eligible for the Solar Tax Credit. However, that doesn’t mean they can’t benefit from it. If a non-profit organization wants to utilize solar, they can partner with a third party. The third party will pay for and receive the tax credit while the non-profit benefits from reduced electric bills.
The Federal Solar Tax Credit is Just One of Many Solar Incentives
Each state has its own incentive programs and different laws that affect how solar can lower your electric bills. In the Midwest, state incentives and savings on your electric bill can be compounded with the Federal Solar Tax Credit to save on a huge portion of the cost of your array—sometimes up to 80%.
If you’re interested in hearing about the benefits that the Solar Tax Credit can bring to your business or farm, you should consider speaking with a solar professional. Going solar is a smart investment for a significant number of organizations and businesses, especially while the 2019 Solar Tax Credit is available. However, with solar companies taking on more projects this year and 2019 being the final year to claim the full potential of the Credit, it’s important to take advantage of it now.
For even more information about the 2019 Solar Tax Credit, you can watch this webinar hosted by one of our Renewable Energy Consultants.
Simpleray is a trusted solar installer with numerous NABCEP certified professionals on staff. If you’d like to find out how solar fits your energy goals, don’t hesitate to get in touch.