Solar Tax Credit to Stay at 26% for Two More Years
Last week, Congress passed a $900 billion COVID Relief package combined with a 1.4 trillion Omnibus Spending Bill providing extended funding and policy changes for several sectors this upcoming Fiscal Year (2021) bringing positive news to the renewable energy sector.
Included in the Omnibus Spending Bill is the extension of the federal solar Investment Tax Credit (ITC) which was originally set to drop from 26% to 22% in 2021 and then to zero in 2022. Under the new bill, the solar ITC will remain at 26% through 2022, fall to 22% in 2023, and to zero in 2024 for residential projects; it will drop to 10% for commercial projects in 2024 before officially going away.
How does the extension of the Solar Tax Credit impact the Solar Industry?
The extension of the solar tax credit is a positive move for the solar industry, Americans across the country, and for the planet.
With the tax credit in the mix, there is a financial incentive for Americans to implement solar panels on their homes. For example, the net cost of a $30,000 solar system would come down to $22,200 after the 26% ITC is deducted saving a homeowner $7,800 in taxes they would have had to pay anyway. Simultaneously, utility costs have increased immensely in the last few years, along with the fluctuation of billing structures making the tax credit that much more valuable. The solar ITC extension, in addition, provides opportunity for continued growth in the solar industry. Solar has grown at an average annual rate of 49% over the last decade providing jobs to nearly 250,000 Americans and paving the way towards a clean energy future.
“Over the next few years, we have an opportunity to build a stronger, more reliable, and more equitable American energy economy and the action Congress is taking today is a helpful down payment.” Stated Abigail Ross Hopper, President and CEO of Solar Energy Industries Association (SEIA) when the bill was released.
Additional Renewable Energy Highlights in Omnibus Spending Bill
Other renewable energy highlights included in 1.4 trillion bill include:
- $35 billion in energy research & development programs including:
$1.5 billion for Solar R&D
$1.3 billion for energy storage R&D
- 1-year extension for the Production Tax Credit (PTC) benefiting wind power projects
- 5-year extension of the Offshore Wind Investment Tax Credit (ITC)
For more information on the COVID Relief Package and the Omnibus Spending Bill, view document here.
Bill passed by Congress on Monday, December 21st, 2020. Bill signed off on by President on Sunday, December 27th, 2020.