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The Solar ITC Explained

Solar ITC Highlights:

  • 2021 ITC rate is 26%
  • This is a “dollar for dollar” savings
  • 2023 steps down to 22%

Details:

Previously scheduled to step-down in 2021, the Solar ITC (Investment Tax Credit) was extended as part of the COVID-19 relief spending. This translates into a 4% discount and shorter payback period for businesses still looking to go solar.

Businesses with high electricity costs investing in solar take advantage of the dollar-for-dollar tax credit, all while reducing electricity bills and reliance on aging infrastructure.

Typical electricity bill savings for Revel Energy customers is between 50 to 80%. 
The first step-down phase in 2020 dropped the Solar ITC from 30 to 26%, and instead of another 4% dip for 2021, the credit value was extended and will stay at 26% until 2023. 

So how is that credit value calculated?

For a business considering commercial solar investment at a gross cost of $500,000, the tax credit would be worth $130,000. 

That means their tax bill for that year is $130,000 less than they had planned, keeping much needed cash in the company.

Businesses that don’t need to use the whole credit in one year can spread it out over time potentially eliminating any tax liability for several years. Along with acquiring the 26% tax credit, the business also acquires depreciable assets. In this case, after Federal bonus and State depreciation, the net cost comes out to around $230,000. 

Similar systems have saved businesses an estimated $100,000 by generating free electricity. That is more money they used for hiring much needed talent, upgrading machinery, or any other cash needs the company may have.

Solar ITC Deadlines:

Solar ITC important step-down dates

See how this CPA firm saved on electricity and gained valuable tax credits.

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