Author: Ashlea Ebeling    12/22/2020      Forbes

How green is your home? Grab the federal solar tax credit while you can.

How green is your home? Grab the federal solar tax credit while you can.


If you’re thinking about embracing solar power at home, Congress is poised to increase the tax incentives offered and give you more time to act. That’s good news for the solar industry and folks who were on the fence about residential solar since tax credits started phasing down in 2020. And it’s good news for climate change. The tax credits have been crucial for supporting the growth of solar. Yet there’s still a long way to go: Solar energy still represents only 2.5% of energy production in the U.S., according to the Solar Energy Industry Association.

Residential solar tax credits were created in 2005, essentially giving taxpayers 30% off the price of a home solar installation. They were extended annually or bi-annually until 2015 when they got a long-term extension which included a phase down: dropping to 26% in 2020, 22% in 2021 and down to zero after 2021. Under the new legislation, expected to be signed into law within days, the residential solar tax credit would stay at 26% for 2021 and 2022, and then drop to 22% in 2023, according to a Democratic Congressional aide.

Say you have a contract for a $40,000 16 kW LG Solar system for your home in Connecticut. The 26% federal credit would give you $10,400 off, compared to $8,800 off under the 22% credit. That’s an extra $1,600 savings. You get the credit (dollar for dollar) off your income taxes for the year when you install the solar panels, and it’s applied to the cost after state incentives. Most states offer tax breaks too (the North Carolina Clean Energy Technology Center maintains a database of state green incentives). Also, many utilities offer net metering that lets you sell excess supply back to them.

The residential solar credit enhancements are part of a broader clean energy package tied onto the annual year-end tax extenders debate included in the giant year-end spending package. That’s all separate from the $900 billion coronavirus relief package that includes $600 stimulus checks to most Americans.

The clean energy provisions also delay phase downs for residential wind power. And they include expanded credits for offshore wind and waste heat to power technology. “I hope these extensions serve as a bridge to the comprehensive reform desperately needed to end our dependence on Big Oil and ensure that green jobs are good jobs. I plan to keep at it until America kicks its carbon habit once and for all,” said Senator Ron Wyden (D.-Ore.), a champion of green energy.

Could residential solar incentives get even better? The Solar Energy Industry Association has an ambitious 100-day agenda for the incoming Biden Administration and 117th Congress dubbed The Solar Vision. One item of interest to homeowners: it’s advocating for the expansion of the the solar tax credit to include standalone energy storage systems, which would help homeowners cover the cost of adding battery backup to existing systems.