The 26% Federal Income Tax Credit for residential and commercial solar installations is dropping to 22% beginning January 1, 2023.
For years, homeowners and business owners opting to install solar systems on the roof of their homes or business have benefited greatly from the Federal Income Tax Credit or Federal ITC. The ITC allows solar panel system owners to deduct 26% of the cost of installing a solar energy system from their federal taxes. The ITC can be applied to both residential and commercial solar systems, and there is no cap on its value.
Essentially, by taking advantage of the tax credit after choosing to go solar, you’ll see a 26% tax break for the cost of your solar system on your federal income filings the following year, no matter the cost. This is especially huge for those who opt to buy their system outright, helping to recoup some of the upfront costs after committing to solar energy.
2022 is the Year for Solar Panel Installation
In 2023, the ITC will drop to 22%. This means owners of new residential and commercial solar installations can still deduct 22% of the cost of the system from their taxes, but installing in 2022 will, of course, lead to the best tax advantage for you. 4% may not seem like a big drop, but it can make a difference when it comes to saving!
Only Tax Breaks for Commercial Solar Energy in 2024
In 2024, the residential tax deductions drop off completely, leaving no tax breaks for new home solar installations. If you install a new commercial solar energy system, however, you can still deduct 10% of the cost of the system from your federal taxes.
While it is always a good idea to switch to solar, 2022 is truly the best year to maximize your investment in renewable energy. To learn more about the Federal ITC, contact Renova Energy today!