Installing solar power has never been more beneficial to invest in as it is today. Clean energy is important for many reasons, so much so that the U.S. government is supporting companies, businesses and home owners who are making the switch to solar powered systems. One of the current opportunities is through a tax credit which can help compensate solar investors for their expenses.
What Is ITC?
ITC is an abbreviation for Investment Tax Credit, which is the tax credit currently being awarded by the U.S. federal government for solar power installations on residential or commercial properties. The credit amounts to 30% of expenses, and can be applied to income taxes after home or business owners install solar systems on their properties for the following 5 years. The tax credit applies to different expenses related to the solar investment, including the equipment used and the installation costs.
Who Is Eligible?
This offer is wide open for solar systems on commercial and residential properties, which were purchased and installed before December 31, 2016. You can even take advantage of ITC when you install solar systems on a residential building that is not your principal residence. Excess amounts of the credit, that exceed tax liability, may also be carried to the next tax year.
How ITC Works
The Investment Tax Credit is based on the amount of the investment made into a solar system on a property. The total amount of the credit is equal to 30% of the basic amount invested in the eligible property.
People who still want to take advantage of the investment tax credit after December 31, 2016 can still do so. The only difference is that the amount of tax credit will drop to 10%, so now would be the ideal time to install your solar system and enjoy the 30% tax credit accompanying it.
How to Calculate?
So how do you calculate the amount of tax credit you can be rewarded?
When calculating the tax credit for a commercial or residential property, you will take the 30% from the gross installation cost of the solar system; this is before any deductions for local or utility rebates. If you have spent $20,000 on a solar system for a commercial property, then your tax credit will be $6000.
Is It Refundable?
If you don’t owe any taxes this year, you will not be able to reap the benefits of this investment tax credit. ITC is not a refundable type of credit. However, even if you can’t use the ITC right away, the tax credit can still be applied until 5 years after the installation of your solar system. Unfortunately, if you haven’t used your tax credit after five years, you will no longer be able to take advantage of it.
Further ITC Impacts
This investment tax credit offers more advantages than tax credits for individuals or commercial businesses. By placing an emphasis on renewable energy, new valuable jobs are created. In turn, the tax credit will stimulate the local and national economy.
Many people think that renewable energy is mainly environmentally friendly and doesn’t offer much benefit to the people using such systems. Nothing is further from the truth because solar energy also reduces the cost for energy consumers and makes your property self-sufficient.
Deadline
The 30% investment tax credit can only be applied to installations prior to December 31, 2016. After that, as previously stated, the ITC will drop back to 10%. In order to take advantage of the investment tax credit, you must ensure that your solar system is installed and is functional by December 31, 2016; otherwise the tax credit you are eligible for will drop.
Taking advantage of renewable energy is now more important than ever, not only for the ever growing concern for the environment and lower monthly costs on energy, but also for the creation of jobs and economic growth. A huge advantage right now is the 30% tax credit to help offset the initial investment.
Given the deadline that applies to this investment tax credit, it’s important to educate yourself on your options and get your solar system installed as soon as possible. Before you make the arrangements, ensure that you are eligible. There are certain exceptions, so it is worth checking with your local government in advance.
Once you have the solar system installed, you can look forward to a better future. You’ll no longer be bound to high energy prices and your home or commercial business will be self-sufficient. The beauty of it all is that you can do so now more affordably with the ITC.
So if you plan on buying the best and cheap solar panels, even sunpowered solar panels for your home, know that solar panels cost less than ever. Check out our solar panel calculator.
Do you have more questions about the Solar Investment Tax Credit? Contact YellowLite today. We're happy to answer any of your questions.