Update: As of 16 August 2022 the federal tax credit for solar has been extended. This article has been updated to show the new rates.
This month the U.S. House of Representatives Committee on Ways and Means reintroduced the Growing Renewable Energy and Efficiency Now (GREEN) Act. The committee hopes the Democrat-controlled house and senate will help pass the act this year. If passed, it would extend tax credits for renewable energy projects and build on extended tax incentives from 2020. It would help many homeowners go solar or expand on current systems.
The federal solar Investment Tax Credit (ITC) would increase
The ITC before the passing of the GREEN Act gave homeowners a federal tax credit of up to 26% of their solar cost. With the GREEN Act, the credit is up to 30% for projects that begin construction between 2021-2027. For projects that begin after 2027, you would receive 26%, 22% for projects after 2028, and 10% for projects after 2028. Those who make installing a solar system a priority would see the highest value.
You should contact a qualified tax expert and consult with them. Neither Freedom Forever’s family of independent authorized dealers nor Freedom Forever itself can give you tax advice. A qualified tax professional will understand your situation and be able to give you the most relevant advice.
You could get an ITC refund instead of a credit
This is very exciting! The credit currently can be applied to the income taxes you owe at the end of the year. You do get up to five years to collect. However, if you do not owe any taxes, you will not be able to receive this tax credit. With the GREEN Act, you could request up to 85% of the ITC as a refund, even if you did not have enough income to offset the credit. This major change would help more homeowners take advantage of the ITC incentive.
Green act: Batteries would get their own incentive
Energy storage technology would receive their own ITC incentive. Buyers could receive a tax credit of 30% through the end of 2026. The credit would go down to 26% in 2027 and 22% in 2028. This new incentive would help more homeowners install batteries when going solar or expand on existing solar systems.
Electric Vehicles (EVs) would get an extended tax credit
The GREEN Act would expand on existing EV incentives for buyers. EV buyers currently qualify for a $7,000 tax credit for the purchase of an EV, until the manufacturer sells 200,000 cars. The extension would grant manufacturers to continue giving a reduced credit for another 400,000 cars. After a manufacturer sells 200,000 cars, buyers will still receive a credit, but it will be $500 less. Eventually, the phase-out period would reduce the credit by 50% per the calendar year.
Freedom Forever would love to help you go solar
We hope the GREEN Act passes in 2021 as it would offer homeowners many new incentives to go solar. Until then, there are current incentives available at the federal, state, and local levels. Talk to one of our independent authorized dealers about active incentives in your area. Let us support you on your journey to go solar in 2021.