Solar Tax Credit Extended
The number of solar homes in the Upper Valley has doubled since 2013, mainly thanks to Solarize Upper Valley but also thanks to a 30% federal tax credit available to both residential and commercial solar customers. That “Solar Investment Tax Credit” (ITC) has been around since 2006 and was originally set to expire at the end of 2016.
Fortunately for our region’s growing solar industry, congress extended the ITC until 2020 as part of a larger spending bill at the end of December 2015. The ITC extension allows homeowners and businesses to claim up to 30% of the cost of a solar project as an income or corporate income tax credit.
Since the ITC was implemented in 2006, annual solar installation in the U.S. has grown over 1,600%. Over the last year, concerns over the looming ITC deadline have plagued the solar market locally and across the U.S. The ITC extension is expected to result in around 25 gigawatts (GW) of capacity above what would be installed without the extension. This represents a total of 100 GW of solar electric capacity, enough to power 20 million U.S. homes or 3.5% of all U.S. electricity in 2020.
The ITC extension also provides market certainty for the next five years, which encourages companies to invest in long-term projects and lowers costs for consumers. Resulting increases in solar manufacturing will likely lower equipment costs and increase demand for solar project installations.
After 2020, the ITC will phase down gradually until 2022. Construction beginning in 2020 or 2021 would receive a 26 percent or 22 percent credit, respectively. Without the new deal, the ITC would have plunged down to a 10% tax credit for any solar project completed after 2016.
The new bill also includes a “commence construction clause” where the credit is extended to solar projects as long as they have started development before the 2020 deadline. As a result, new solar projects will not need to dramatically rush to finish construction in order to qualify for the tax credits.
What does the ITC mean for you?
The 30% tax credit means that if you invest in a solar project, you can write off one third of each solar project’s installation cost as a dollar-for-dollar reduction in the income taxes that a person or you or your company would otherwise pay to the federal government.
What does this mean for the Upper Valley?
The exponential growth of solar projects in Vermont and New Hampshire is directly related to the ITC tax break. Vermont currently has the most solar jobs per capita in the U.S. with about 1,500 people employed in the state’s solar industry, the production of solar power employs about 1,500 people. Many of those jobs are in the Upper Valley. Click here to see a list of solar installers in our region.
What else was in that ITC bill in December?
The ITC extension was part of a compromise among congressional leaders. In exchange for the solar and wind tax extensions, Congress revoked a 40-year ban on exporting oil from the US.
For information on how to go solar, visit VitalCommunities.org/Energy/Solarize-Resources