ITC Step Down: Effects on Solar Installation

The Effects of the ITC Step Down on Solar Installation

As you probably already know if you’re interested in going solar, the federal solar ITC (Tax Credit) stepped down on 1/1/2020 from 30% of total system cost to 26%. We’ve covered what this means for homeowners in a few articles, but what might not be immediately apparent is the effect that this has on the solar installation process and the installers themselves.

Effects on the Homeowner

For the homeowner, this decrease in the federal solar tax credit means that where you used to be able to claim 30% of the total cost of your solar system on your taxes, now you can only claim 26% of the cost. 4% may not seem like a lot, but for bigger systems this means that homeowners are missing out on thousands of dollars in incentives. Fortunately it’s not too late to claim the 26% tax credit, since in order to do so you would have had to begin work on your system installed prior to 1/1/2023. The good news is that the 26% tax credit is around for all of 2022, until it steps down again in 2023 from 26% to 22%. It may seem like you’ve got two years to claim the 26% tax credit on your system, but there are more factors to consider than just the amount of time until it steps down again.

Effects on the Installer

Unfortunately for homeowners interested in going solar, missing out on an additional 4% of your tax credit is not the only negative consequence of the tax credit stepping down. As you might imagine, the winter months of 2019 were a busy time in the solar industry, with homeowners clamoring to get their systems installed before the end of the year to claim their full 30%. This caused an influx of jobs to solar installers, who are already generally working at capacity throughout the year. With everyone trying to get their solar system installed at once, many installers faced operational challenges and delays, which consequently caused several homeowners to miss out on their full tax credit. There is a silver lining here, however, in that these homeowners started their process early enough to fully guarantee this year’s 26% tax credit.

The Moral of the Story foresaw these difficulties ahead of time, and worked with a group of our installers to bypass the limitations caused by this end-of-the-year influx and make sure our customers were able to claim their full 30% federal solar tax credits. Many solar customers aren’t so lucky, however. There is no guarantee that the same problems and/or workaround solutions will arise at the end of 2022, although we will do our absolute best to accommodate each unique situation like we did at the end of 2019.

As Benjamin Franklin said, “You may delay, but time will not.” Right now is still the best time to go solar that there has ever been, but the year moves quickly, and soon the 26% federal solar tax credit will step down to 22%, and in 2024 it will be gone altogether. Getting your solar project started now will make sure that you’re up and running in time for those high-producing, hot summer months, and will make you secure knowing that you won’t have to fight other procrastinators for your full tax credit at the end of the year. Click here to schedule a call with one of our energy advisors and start comparing solar quotes!

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