What You Need to Know About Changes to Federal and State Solar Tax Credits
Many people choose to go solar because they want to lower their carbon footprint and reduce monthly energy bills. But for the past several years there has been an added benefit to go solar, and it’s the tax credits available when you get solar panels installed. It provides some financial help to offset the initial costs of solar installation.
The good news is that the federal tax credit—also called the investment tax credit, or ITC—were renewed in 2017 for an additional five years. The bad news is that the amount you can claim is going down each year. In 2020 the maximum you can deduct is 26%, down from 30% last year. In 2021 it will drop again to 22%, in 2022 it will be only 10%, and by 2023 it will be gone.
How to Claim the Solar Tax Credit
Any homeowner that owns a solar energy system is eligible for the tax credit to offset tax liability. One benefit of the credit is that if you don’t owe federal taxes this year or the credit is more than you owe, you can roll over the credits to offset taxes you owe in the future (through the last year they are available, so 2022). You will claim the credit when you file your annual tax return, so save information about the purchase of your solar energy system and any rollover credits still available to give to your tax advisor or accountant.
The Utah State Tax Credit
The Utah State Legislature also signed an extension of its state solar tax credit in early 2018. Like the federal extension, Utah’s law extended the tax credits available for five years, but the credits will steadily decline after 2020.
Utah residents can claim 25% of the cost of a residential solar system, up to a maximum each year:
2020 maximum credit: $1,600
2021 maximum credit: $1,200
2022 maximum credit: $800
2023 maximum credit: $400
Why Homeowners Should Act Quickly
For both the federal and state tax credits, 2020 is an important year. While the amount of available federal credit has dipped slightly from its peak of 30%, this is the last year you can get the full state tax credit. If you have been putting off the purchase of a new solar system, right now is the time to act.
Call PRVL Energy to Get Started
To avoid missing the opportunity for federal and state tax credits, contact PRVL Energy. We can help you get started on the process of getting solar energy installed on your home.