by Cody McGowan, on Jul 20, 2020 8:32:00 AM
Take Advantage of the 2020 Tax Credit for Installing a Solar Energy System
This year, 2020, is a good year for those who are considering a solar power system. Why? It’s the last year the federal government is allowing solar panel owners to deduct 26% of the cost of the system from their federal taxes. Starting January 1, 2021, the deductions drop to 22%. If you’re wondering if now is the best time to buy solar panels for your home in Chicago, IL, the answer is “Yes!” Read more to discover all the benefits of getting a solar panels system before the year’s end.
SEE ALSO: Is A Residential Solar System Really Worth It?
The History of the Solar Tax Credit
The federal government wants you to save energy. It’s good for our environment and good for our economy. Because solar energy creates clean, renewable energy, it produces zero carbon emissions and reduces our reliance on fossil fuels. At the same, time it helps homeowners save money by reducing their energy bills. And that extra money goes back into the economy when they purchase goods and services. So, it’s a win-win for everyone!
The ITC, also known as the Investment Tax Credit, was established by the US government to encouraged homeowners to switch to solar. Between 2016 and 2019, the tax credit was 30%. In 2020, taxpayers can deduct 26% of the cost of a solar system from their taxes. In 2021, the incentive will be reduced to 22%. And after 2021, there is no incentive for residential solar energy systems. If you plan to go solar, then now is the time . . . and certainly don’t wait until 2022.
How the ITC Works
Did you know that installing a solar system benefits you financially? In fact, one of the primary reasons homeowners switch to solar is because of the savings. There are several ways to save and even profit from your new solar power system. First, if you owe federal taxes at the end of the year (and you don’t qualify for a refund), you are eligible for the solar investment tax credit.
Let’s say your total credit is $8,000, but you only owe $2,000 in taxes. Then you can “roll over” the remaining credits into future until the credit is depleted. However, you must own your system, not lease. Otherwise, you cannot claim the credit. It’s important to discuss tax details with your accountant if you have questions.
Other Ways to Save
The savings don’t stop with the ITC. When you buy solar panels, you also save through other incentive programs, such as net metering and SRECs (Solar Energy Credits). Net metering allows you to receive money from your utility company for the solar energy you produce. And you earn one SREC for every 1,000 kilowatt-hours your system generates. Those certificates translate to real dollars when you sell them back to the government.
Want to know more about how you can earn money when you buy a solar panel system? Call Summit Solar at 888-884-3557 or complete our online contact form. We look forward to hearing from you!
