Consumers in the U.S. have been struggling with the idea of having renewable energy as their main source of power for homes and businesses. What we know is that solar power has soared in popularity in recent years.
Business owners are also “going solar” in record numbers as they realize the cost savings of doing so. And thanks to the federal government’s passage of the Energy Policy Act of 2005, there is now a solar tax credit! The 2016 federal spending bill authorized a 5-year extension of the solar panel tax credit. This makes solar power more affordable for all Americans, and that includes business owners.
Known as the Investment Tax Credit (ITC), the federal solar tax credit makes it possible for homeowners and business owners alike to deduct up to 30 percent of the costs of installing a solar energy system from your federal taxes. Think of this as a 30-percent discount on the cost of going solar! The ITC is in effect for residential and commercial systems. Because of the ITC, the average EnergySage Solar Marketplace shopper saves over $5,000 on the cost of going solar in 2019!
You are not eligible for the ITC if you lease your solar panels or if you signed a power purchase agreement. There is no cap as to how much you can claim with the ITC; however, because the ITC is a credit and not a refund, you can’t get more back in a single year than what you owe in federal taxes. Instead, the remainder of your solar tax credit will roll over to the next year.
For more information on the ITC, contact the tax experts at PorterKinney, PC.
While going solar is catching on in big numbers for all consumers, business owners stand to benefit the most based on the U.S. tax code. SEIA (Solar Energy Industries Association) supports smart tax policy that generates continued innovation in the solar industry. Going solar for your businesses allows business owners to directly benefit from the depreciation aspect of the tax code, as depreciation facilitates greater investment in renewable energy and ultimately leads to lower costs.
Known as the Modified Accelerated Cost Recovery System (MACRS), this is a method of depreciation in which a business’s investments in certain tangible property are recovered – for tax purposes – over a specific amount of time through annual deductions.
2 Quick Facts About MACRS:
MACRS is the method of depreciation used for most property, though assets vary by class, which determines the depreciable life of the property. Class depreciation timeframes vary between three3 and 50 years, depending on the particular type of property.
2016 – 2019: The tax credit remains at 30 percent of the cost of the system; .
2020: Taxpayers, including business owners, using solar energy receive a tax credit of 26 percent of the cost of the system.
2021: The solar tax credit drops to 22 percent of the cost of the system.
2022 and future years: The solar tax credit drops to 10 percent of the cost of the system for commercial projects and is no longer available for residential homes.
Business owners who have purchased a solar energy system stand to recoup a lot of money from their tax credit. Here is the extensive list of what you can claim with your solar tax credit when filing your tax returns:
Presented by Troy at Hot Solar Solutions in Kennewick, WA, your complete solar solutions company:
Disclaimer: While PorterKinney PC has made every attempt to ensure the accuracy of this document, it is not responsible for any errors or omissions, or for the results obtained from the use of the information in this presentation. This document been prepared for information purposes and general guidance only and does not constitute legal, accounting or other professional advice. Circular 230 Notice: The information included in this presentation is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties or (2) promoting, marketing, or recommending to another party any tax related matters.