An extension in ITC that will change the way USA looks at Solar Energy !
The amount of sunlight that hits the surface of the earth every minute is enough to cater to a year of energy needs. Harnessing solar power with the use of solar power modules generates a steady electrical supply around the world.
Since the enactment of Investment Tax Credit (ITC) in the year 2005, solar energy generated from the photovoltaic systems pan America has grown at an average annual rate of 52%. Later, the GreenEnergy Act of 2009 helped promote the use of photovoltaic systems to generate green energy.
What is ITC?
ITC enacted under the Energy Policy Act of 2005 incentivizes the development of renewable energy projects. It is a policy that kickstarted the U.S. solar industry by giving customers a percentage of a project’s cost back against their tax liability.
Why did the government extend the ITC?
Following two extensions in the years 2006 and 2008, the ITC has been a pivotal factor for the growth in solar energy generation pan America. Paying heed to the demands of Solar Energy Industries Association, (SEIA) in 2015, the federal government granted ITC a multi-year extension.
The extension was a necessary step that will help prevent the solar energy generation rate of the U.S.A from going down, from 16% to 12% by 2030. At present, Solar power constitutes to 96.1 TWh of electricity. (2.30% of total electricity in the U.S.A)
A break-down of the tax relaxation under the ITC
Prior to the GREEN Act of 2019, the ITC permitted a relaxation of 30% on the federal taxes of residential, utility, and commercial-scale solar installations. Section 25D of the Energy Policy Act enumerates the benefits of ITC for residential properties, whereas Section 48 states the benefits of ITC for utility and commercial-scale properties.
The ITC may not be here for long
In 2015 the GREEN Act helped extend the ITC by five years. (until the end of 2021) Following a reboot in November 2019, the tax credits for commercial and residential solar modules will drop down.
The tax credits for residential and commercial solar installations following the reboot are:
From 2016 to 31 December 2019: Owners of residential as well as commercial solar power systems deduct 30% of the system cost from their federal taxes, under ITC.
Until 31 December 2020: Owners of residential as well as commercial solar power systems deduct 26% of the cost system from their federal taxes, under ITC.
Until 31 December 2021: Owners of residential as well as commercial solar power systems deduct 22% of the cost system from their federal taxes, under ITC.
2022 onwards: The tax relaxation for residential solar power systems drops down to Zero. For commercial and utility-scale systems it drops to and remains at 10%
The catch here is that if a commercial system starts the construction before 31 December 2012, it may still qualify for a 30, 26 or 22% tax credit, only if it is up and running before 31 December 2023.
Go green with solar energy systems while you can!
Solar power systems have become more cost-effective, and harnessing solar power has become more efficient over the years. Since there will be no tax relaxations on the residential solar power systems after 31 December 2022, the best time to install a residential solar power system is now.When both residential and commercial solar power systems contribute to the total solar energy generated, America will get a step closer towards minimizing the carbon footprints of humanity. Don’t wait for the days to pass, be a part of the change by installing efficient solar power systems that will save you money while saving the environment.