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U.S. Federal Solar Panel Tax Credit Will Shrink in 2021

11/16/2020 15:58

The largest federal solar panel tax credit for American home and business owners - the Solar Investment Tax Credit (widely known as the Solar ITC) will shrink from 26% to 22% on January 1, 2021.

There's still time to get this huge solar panel tax credit at its higher 26% rate. But to do so, your solar electric system must be installed and turned on before December 31, 2020 - so you need to act fast. Systems commissioned in 2021 will still qualify for the Solar ITC, but at its lower 22% rate.

Note that the tax credit is given to the owner of the solar electric system - meaning that homeowners who lease a system instead of purchasing outright will not get the tax credit - the leasing company will.

History of the Federal Solar ITC

The Federal Solar Investment Tax Credit launched in 2006 as a tax credit valued at 30% of the cost of a newly installed solar electric system. It remained at the 30% level until 2020, when it dropped to 26%. On January 1, 2021 it will drop again to 22%. These step-downs were always part of the plan because the Solar ITC was always intended to reduce the cost of solar electricity and grow the solar industry.

In both regards, it has been a big success. The U.S. solar industry has added hundreds of thousands of jobs since the Solar ITC's launch in 2006, and in most places in the United States today, solar electricity is competitive with - and often less expensive than - utility electricity generated from fossil fuels.

Chart of U.S. solar industry jobs from 2010-2019

Chart of annual U.S. solar panel sales and prices from 2006-2019

The Future of the Federal Solar ITC

The future of this solar panel tax credit is uncertain. If Congress doesn't extend the Solar ITC during 2021, it will end on January 1, 2022 for residential systems, and fall to 10% for commercial and utility scale systems.

If you want to go solar at home, now truly is the time - and it's not too late yet. Round up your last few electric bills and then get a free solar quote online or call us at 800-919-2400 to talk to a solar expert.

And if you can't go solar yourself but want to support solar power's continued adoption in the U.S., let your U.S. congressional representatives know you want to see the Solar ITC extended!

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