If you're thinking about installing solar panels, you may have heard of the solar Investment Tax Credit, also called the federal solar tax credit. The current federal solar tax credit guidelines were extended through 2022 when former President Donald Trump signed the Consolidated Appropriations Act, 2021 this past December. That's good news for anyone interested in getting a residential solar panel set up in the next couple years at the same 26% tax credit as 2020. CNET explains more here.
The Tax Credit Today
The Consolidated Appropriations Act, 2021 extended the 26% tax credit through 2022. It will drop to 22% in 2023 and expire at the end of 2023.
For example, if you pay $14,000 for a solar panel system in 2021 (or in 2020 or 2022, for that matter), you'd be eligible for a $3,640 tax credit. Keep in mind that any other incentives provided by your state or utility company aren't included in the total. So if you receive $1,000 in state (Arizona) or utility incentives, $13,000 of the original $14,000 cost could be applied to the federal solar tax credit, taking the total tax credit down to $3,380.
The good news is that you can buy solar panels with the expectation that you'll get a decent reduction in your taxes. We'll continue to track this tax credit over time and provide updates if any of the current provisions are extended beyond 2022 -- or change completely. The deal may be renewed yet again, but with the current step-down plan in the new law, if you don't take advantage of the 26% tax credit, you'll get less money back if you buy solar panels after 2022.
Speculation:
The new administration is exploring increasing the tax credit to 30%. We will be tracking this very closely.
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