Has residential solar energy been on the horizon when it comes to your future home upgrades? If you have been considering investing in solar, or a solar + battery for your home, 2020 is still a great year for tax savings on solar installation, allowing you to reduce your installation costs and maximize your energy savings for decades to come.
Here is what you need to know about how the federal solar tax credit works, and why 2020 is the year to take advantage of these solar savings.
Understanding the Federal Solar Investment Tax Credit
The federal solar tax credit also goes by the more formal name of the Investment Tax Credit, or ITC. It was enacted to encourage homeowners to invest in renewable energy sources for their homes, by offering a tax credit based on installation costs. The ITC started in 2006, was extended in 2015, and is set to end at the start of 2022. The savings you can expect for the remaining years of the federal solar tax credit are as follows:
2020: Reduce your Federal taxes by 26% of your total residential or commercial installation costs
2021: Reduce your Federal taxes by 22% of your total residential or commercial installation costs
2022 and beyond: Credit is reduced to 10% for commercial systems, and eliminated for residential systems
In order to qualify, you must own your system (no solar leasing), and for residential systems the system must be installed and activated (put in service) by the end of 2020. For commercial systems to qualify, significant work must be started in 2020.
Calculating the Federal Solar Tax Credit in 2020
So how will this solar incentive work when you look at the dollars and cents? Let’s use a nice round number as an example, like $10,000. For every $10,000 you spend on solar installation, you can reduce your federal tax liability by $2,600 in 2020 with the 26% tax credit rate. If that reduction is more than what you owe for your 2020 federal taxes, you can even roll the remainder over into the next year! Next year, those savings will drop to $2,200 for every $10,000 spent on a solar installation.
Other Solar Rebates & Financing
This federal solar tax credit is the largest financial solar incentive, but there are many more programs to take into account before you install solar in Arizona, such as:
The Arizona Solar Tax Credit 2020
This Arizona solar incentive works similarly to the federal version, except that it is 25% and caps off at a $1,000 maximum benefit.
Utility Rebate and Buyback Programs
Depending on your utility, you may be able to get up to 30% of your solar installation costs covered. Other utilities also offer solar buyback programs that offer a credit for the solar your system produces and sends back to the grid. Check our full list of utility programs on our solar incentives and financing page.
Through our partnership with Koala Financing, you can pay for your solar installation over term lengths up to ten years at a fixed rate, with no equity requirement.
Get Started with a Fast, Free Quote
If you’ve been wondering how much solar panels cost to install, or are looking for affordable solar installation here in the greater Phoenix area, we are here to answer your questions. With our fast and free solar quote, we can give you an idea of what your solar installation will cost, even after factoring in the federal solar tax credit, the Arizona state tax credit, utility rebates, and other solar discounts. We can also walk you through your financing options, and compare your monthly solar loan payment to what you would be paying in energy costs.
Don’t miss out on the tax savings of the federal tax credit—go solar this year and pay less! Get a free quote by calling 520-868-0700 or get in touch here.