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The Current and Future State of Solar Incentives

The Current and Future State of Solar Incentives

With the US presidential results confirmed, many think that solar incentives may change within the next few years. The large difference in environmental policies between the two presidential candidates has led many people to believe that solar incentives will be substantially better within the next few years. President-elect Joe Biden has announced to reform and extend the current tax incentives in place for clean energy. However, while waiting for the January results of the US Senate, it is uncertain if these plans will be able to go through.

The Federal Investment Tax Credit (ITC)

Solar incentives are government programs that give money to consumers to persuade them to invest in solar energy. There are many different solar incentives available to homeowners and businesses, such as the Solar Investment Tax Credits (ITC). It’s one of the most important solar incentives and has significantly contributed to the growth of the solar industry within the US. The ITC is a federal program that provides tax credits to consumers who invest in solar energy and projects. Below is an example of how they work. Tax liability is the amount of tax owed to the government. The tax credit is the amount of money you save from not having to pay the tax. 

current and future state

A Recap of the Step-down of ITCs

The ITC was established by the Energy Policy Act 2005 in 2006 and planned to expire in 2007. Congress has extended the program multiple times. However, in 2019, an extension of the ITC was not included in the $1.37 trillion federal budget passed by Congress. In 2020, owners of new residential and commercial solar systems received a 26% tax cut of their total purchase price. This was a 4% drop from the year 2019 where the tax credit was at 30%. The tax credits will continue to decrease to 22% in 2021. According to the current status, the tax credits will expire in 2022 for homeowners and permanently stay at 10% for businesses. 

current state of solar incentives

Contact us if you have any questions, we are more than happy to help you out!