On August 8th, 2005 George W Bush signed into law the Energy Policy Act of 2005. After first being passed by congress in July 2005 it then became effective in February 2006. The act aimed at combating increasing energy issues. Its enactment has modified US energy policy by offering tax benefits and loan guarantees for different forms of energy production.
The legislation provided for federal financial opportunities (tax credits) to make environmentally sustainable improvements to their homes and communities. It made energy efficiency improvements more affordable for walls, doors, windows, roofs, water heaters, and so on. This includes solar energy.
The development of these environmentally sustainable improvements expanded with increased demand. This resulted in positive changes that have been demonstrated through to today in both the short and the long term.
With some renewable electricity, it’s not only about protecting the earth and offsetting power bills. It’s also about taking advantage of the 2020 solar tax credit before it expires on December 31st, 2020.
So what is the 2020 federal solar tax credit?
According to the US Department of Energy’s Office of Energy Efficiency & Renewable Energy “The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar photovoltaic (PV) system.” During the year 2020, the solar investment tax credit is 26 percent of the total cost of your solar installation. After December 31st, 2020 it drops to 22 percent before fading away in 2022 unless a congressional renewal is made.
The investment tax credit (ITC) for solar power does not have a limit and covers all construction, supplies, and labor expenses. It also includes any equipment, such as mounting hardware and inverters, required to develop an optimum system. The tax benefit covers costs that come from permitting services, on-site planning, development costs, and inspection fees.
This tax credit also includes any energy storage devices (or batteries) installed. As long as the energy storage unit is solely powered by the solar array and mounted before December 31, 2020.
When a battery is installed in your home there are a few precautions that will take place. Before it starts collecting and releasing energy to the home or electricity grid on demand there is a small time gap.
The device may already produce power and generate electricity. But there is a slight time delay between the deployment of the system and the building of the interconnection. However, just by having the unit installed, ensures that you will be qualified. Even if the battery may is not in service until 2021.
This is the same for businesses that choose to pair their solar array with a battery.
Who all can claim the federal tax credit?
Any homeowner, business owner, or (as stated by the Office of Energy Efficiency & Renewable Energy) “a tenant-stockholder at a cooperative housing corporation and members of condominiums…if they contribute to the costs of an eligible solar PV system.” This does exclude those who are renting. Even if your landlord installs a PV system, you are unfortunately not eligible for the incentive.
Do the solar panels have to be on the roof of the building in order to qualify?
No, the solar array can be anywhere that it can optimally generate energy. In other words, where it can receive the most sunlight.
We proudly offer custom solar installations that go beyond rooftop systems. Including carports, solar canopies, and even ground-mounted systems. Our team of experts are ready to create an array that best suits your needs.
Is a refund given if the tax credit exceeds the tax liability?
No, as a non refundable tax credit you can not receive a refund. However, you will be able to transfer any unused amount to the next tax year. And you can use any leftover tax credit (for up to 4 years) for any tax you owe.
You can also claim this tax credit against the alternative minimum tax. If it is federal income tax or alternative minimum tax, the tax deduction can be used.
How far ahead do I need to start the procurement process? In order to claim the 2020 tax credit before Dec 31st, 2020?
The cost of a solar energy system is lower than ever before. In addition to the lowest energy storage technology costs, many home and company owners are quickly switching to solar power. And having been voted the #1 Solar Residential Installer in Georgia, we do book up fast.
With uncertainties that have followed COVID-19 our normal installation timeline has been slightly strained. Although we have taken every conceivable step to maximize our productivity and minimize our timetable.
Even still, there are variables outside of our influence. There are permitting offices that are closed or running on a smaller staff due to COVID-19, as an example. Thus the processing time is longer than normal.
We have been able to overcome many of the challenges encountered by other companies in the solar industry. Due to expanded crew numbers and a substantial amount of solar panels in stock and ready for installation.
While we are continuing to work hard to keep minimum timetables, the reality remains that calling us now is the safest way to ensure you are qualified. The sooner the process begins, the sooner the device is installed. Thus the more we can guarantee that the cutoff date will not pass you.
For answers to all of your solar federal tax credit questions give us a call at 770.485.7438. We will gladly walk you through the process and answer any questions you may have.
Find out how much you can save by setting up your free consultation; contact us today to get started.