This is learn how to benefit from the solar tax credit score extension in 2021

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If you’re thinking about installing solar panels, you may have heard of the solar investment tax credit, also known as the federal solar tax credit. The current federal solar tax credit guidelines were extended to 2022 when former President Donald Trump signed the Consolidated Appropriations Act 2021 last December. This is good news for anyone interested in having a home solar panel set up in the next few years with the same 26% tax credit as 2020.

Burning coal, oil, and natural gas for heat and power is responsible for around 75% of US greenhouse gas emissions. These pollutants contribute to rising global temperatures and sea levels, changes in weather conditions, and other factors related to climate change.

Renewable alternatives like geothermal energy, Wind power and solar power, reduce the footprint caused by these fossil fuels. The United States has several incentives for commercial and residential use of renewable energy, including the federal solar tax credit. President Biden has already expressed great interest in environmental issues by returning to the Paris Climate Agreement on his first day in office. This suggests that the federal 26% solar tax credit may be extended beyond the current end of 2022 deadline, but the Biden-Harris government has not (yet) made any changes to the federal solar tax credit.

Read on to learn how you can take advantage of this tax credit.

See more: A coal company in Kentucky is turning two old mining sites into one giant solar farm

A short story

The 2005 Energy Policy Act marked the beginning of federal solar tax credit when it was signed into law by then-President George W. Bush. The first part of the 550-page document describes the aim of the law: “Securing jobs for our future with safe, affordable and reliable energy.” It sets out a number of ways the US government intends to address energy issues in the US, including tax incentives for “energy efficient homes”.

Here is an excerpt:

SEC. 25D. EFFICIENT PROPERTY FOR RESIDENTIAL ENERGY. ” (a) CREDIT PERMISSION. – In the case of a natural person, an amount of – ” (1) 30 percent of the expenses incurred by the taxpayer in this year for qualified photovoltaic properties “(2) 30 is granted as a credit on the tax levied in this chapter for the tax year Percent of taxpayer spending this year on qualified solar water heating properties … “

In short, the income tax you owe (for a percentage of the cost) is being reduced from dollar to dollar. The federal solar tax credit originally expired at the end of 2007, but has been extended several times. The initial 30% reduction stated in the original law lasted until 2019, but has since turned into a phased-out approach, where the percentage steadily decreases before the loan eventually expires.

The Energy Policy Act of 2005 continues to describe eligibility for the loan, but this much shorter summary of the federal solar tax credit has all the important details without going through the entire text of the law. Note that the summary has not been updated with the most recent tax credit renewal dates, but the details of who qualifies remain the same.

The summary details who is eligible. However, here are the basic requirements:

  • Your solar system must be installed in the calendar year in which the tax credit is active
  • The system must be in a primary or secondary residence in the United States
  • You must own the system and have paid for it using either cash or funding
  • The solar system has never been installed or used before

The federal solar tax credit percentage declined to 26% in 2020 and should drop to 22% this year before it expires in 2022. Instead, former President Donald Trump extended the tax credit at current levels for two more years when he signed the Consolidated Appropriations Act, 2021 in December 2020.

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The tax credit today

With the Consolidated Appropriations Act of 2021, the tax credit was extended from 26% to 2022. It will drop to 22% in 2023 and expire at the end of 2023.

For example, if you pay $ 14,000 for a solar panel system in 2021 (or 2020 or 2022), you will receive a tax credit of $ 3,640. Note that all other incentives provided by your state or utility are not included in the total. So if you have $ 4,000 government or utility incentives, only $ 10,000 of the original cost of $ 14,000 can be applied to the federal solar tax credit, reducing the total tax credit to $ 2,600.

The good news is that you can buy solar panels with the expectation that you will cut your taxes appropriately. We will continue to track this tax credit over time and provide updates if any of the current regulations extend beyond 2022 – or change completely. The deal can be renewed one more time, but with the current cancellation plan in the new law, you will get less money back if you buy solar panels after 2022 if you don’t take advantage of the 26% tax credit.

Learn more about government and other solar incentives here.


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