This is no longer the most up to date tax credit information. Visit our federal tax credit guide for a more recent and accurate overview of the Solar Tax Credit.
Whether for home or business, solar in 2021 is the best deal EVER! Make it your resolution to reduce dependence on the traditional energy system and help the environment
UPDATED: January 2022
There is bright news for both homeowners and businesses who are ready to make 2022 the year they finally go solar - the 26% federal tax credit was extended last year and will be accessible until the end of 2022! In addition to reduced solar panel prices and ever-increasing rates from sources of traditional electricity, this tax credit makes 2022 the best year to go solar.
Read on for more specifics about each incentive.
Disclaimer: ReVision Energy provides this for educational use only, we are not tax professionals and are not offering tax advice. We recommend all solar customers to consult with tax counsel.
The 26% federal tax credit is called the "Residential Renewable Energy Tax Credit" and was established by the federal Energy Policy Act of 2005. The 26% includes all cost of labor as well as equipment costs for the renewable energy system. The credit can also be carried forward to future tax years if you cannot take the full credit in the year the system was installed.
Furthermore, the IRS has issued guidance suggesting that battery storage systems, when charged with electricity from solar electric arrays, are eligible for the tax credit.
The credit was originally scheduled to be discontinued year-end, 2015, and then in 2020. However, it was extended again in December 2020 with the passing of the bipartisan stimulus bill in response to the COVID-19 pandemic. The bill introduced the following timetable:
Businesses, as well as homeowners, can benefit from a 26% tax credit on renewable energy systems, called the energy investment tax credit.
Similarly to the residential program, it was extended by Congress at the end of 2020 and faces a step-down at the end of 2022:
Also similarly to the residential program, IRS tax guidance suggests that battery storage systems are eligible for this credit when the battery system is charged by a solar electric generation system.
Ground mounted solar array for a business
Under the federal tax code, renewable energy systems qualify for a 5-year Modified Accelerated Cost-Recovery System (MACRS) depreciation schedule.
The exact benefit of this depreciation is complicated and varies depending on your businesses' tax rate, but typically it adds up to an additional 25% of a solar energy project's cost being offset by reduced tax payments.
To further sweeten this incentive, The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.
Given the time value of money, this benefit helps make solar energy systems more accessible in the near-term by businesses that will be able to save significant fossil fuel energy costs over the life of the system.