With over 1,900 MW of solar energy installed in South Carolina alone, renewable energy continues to take the country by storm. Part of this surge in popularity is due to green and renewable energy’s incredible benefits.
One such benefit is the investment tax credit. This longtime federal tax credit provides solar panel owners with an excellent incentive to take up solar energy.
But just how does the investment tax credit work? Is it actually worth taking the time to file?
That’s what we’re here to look at today. Read on to find out more about how investment tax credits can benefit you.
What is the Investment Tax Credit?
The investment tax credit, or the ITC, is a program designed to incentivize individuals and businesses to take up renewable energy. These tax credits are available to both residential and commercial building owners.
If these entities install some sort of renewable energy generation equipment, they become eligible for the ITC. The amount of tax credit depends on the overall cost of the equipment itself.
How Does the ITC Work?
As of 2022, the ITC is a 26% federal tax credit for both residential and commercial investors who take up renewable energy for their properties. This 26% is based on the total renewable energy investment.
The ITC is a dollar-for-dollar reduction in a person or business’s overall income taxes for the year. For example, if a homeowner installed a solar panel system that cost $10,000, they would multiply that amount by 26%.
That 26% would then be the deductible amount on their federal income taxes. It’s important to note that the reduction rate won’t stay the same forever.
For all renewable energy equipment installed between 2021 and 2022, that 26% reduction still holds. If you installed new equipment in 2023, however, that percentage drops to 22%.
After 2023, residential homeowners won’t be able to claim the ITC while businesses can only claim up to 10%. This means it’s never a better time than now to install solar to get your solar tax credit.
Is the ITC Even Worth It?
Some might believe that the ITC is too much trouble to file every tax season. While this is understandable, there’s no denying the impact of the ITC in actually incentivizing people to take up solar.
The amount of growth this market has seen is a testament to this.
The solar energy market alone has grown exponentially in the past seven or eight years and is only expected to keep growing. It’s believed that this is due to the ITC and other incentives convincing homeowners to take up solar.
The financial upside of saving money on energy and on annual taxes is an inviting one. If you’re looking for a solar savings estimate in South Carolina, click the link to find out more.
Taking Up Federal Tax Incentive for Solar Energy
Installing solar panels and other renewable energy equipment can be expensive but not out of reach. Use this guide to understand how the investment tax credit works and start saving today.
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