The investment tax credit, also known as the federal solar tax credit, allows you to deduct 30 percent of the cost to install solar from your federal taxes.
The residential and commercial solar ITC has helped the U.S. solar industry grow by more than 10,000% percent since it was implemented in 2006, with an average annual growth of 50% over the last decade alone.
On December 17th, 2019, we learned that the federal tax extenders bill would not include an extension of the ITC, despite solar’s bi-partisan popularity.
Without the extension, the credit will phase down as outlined in congress’ 2015 compromise:
30% = 2019
26% = 2020
22% = 2021
10% thereafter, for Commercial projects only
Your solar project must be energized to qualify for that year’s tax credit rate.
There are safe harbor provisions that allow projects to start in a given calendar year and still qualify for that year’s rate, typically by spending at least 5% of the projects cost and starting construction activities.