The Federal Solar Investment tax Credit (ITC) Details
The Federal Solar ITC was extended at the end of 2020 and is comprised of two versions: Residential and Commercial
The residential solar ITC remains at 26% for projects that begin construction in 2021 and 2022. The solar ITC declines to 22% in 2023 and is no longer available in 2024.
The solar ITC for commercial renewable installations remains at 26% for solar projects that begin construction in either 2021 or 2022. The tax credits then will fall to 22% in 2023 and then slide to 10% for 2024.
The following table contains pertinent details for both the residential and commercial solar ITC:
|Residential Solar ITC||Commercial Solar ITC|
|The system must be placed in service
during the tax year and generate
electricity for a home located in the
United States. The IRS will expect the solar installation to be completely installed during the calendar year.
|Companies that begin solar projects in 2021 have a four-year period to bring their projects online in order to take advantage of the ITC. The solar projects will need to be functioning by the Jan. 1, 2026 deadline.|
|The solar PV system is to be located at
your primary or secondary residence in the United States, or for an off-site community solar project*.
|There is a one-year extension of the production tax credit/ITC for land-based wind systems at 60% of full valuation.|
|You must own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing nor are in an arrangement to purchase electricity generated by a system you do not own).||There is also an offshore wind investment tax credit of 30% for projects that begin construction Jan. 1, 2017 through Dec. 31, 2025.|
|The solar PV system is new or being
used for the first time. The credit
can only be claimed on the “original
installation” of the solar equipment.
|Get Accelerated Depreciation of solar installations through Modified Accelerated Cost-Recovery System (MACRS).
(See ‘Links’ below)
|Accepted expenses for the installation of the solar system include contractor labor costs for onsite preparation and assembly for an original installation, that includes permitting fees, inspection costs, and developer fees.|
|Balance-of-system (BOS) equipment,
including wiring, inverters, and
Energy Storage (Batteries): Energy storage devices that are charged exclusively by the associated solar PV panels, even if the storage is placed in service in a subsequent tax year to when the solar energy system is installed (However, the energy storage devices are still subject to the same installation date requirements).
Links for More Information:
Here is the link for the entirety of the Solar ITC and related bills in the “Consolidated Appropriations Act, 2021” issued by the 116th Congress on Friday, January 3rd, 2020: https://www.congress.gov/116/bills/hr133/BILLS-116hr133enr.pdf