Solar tax credits are changing: here’s what you need to know.


They say all good things must end and that’s equally true of the 30% federal tax incentive for installing solar panels on your home or business. For most people, taking advantage of all available incentives is imperative to making the investment in solar energy a financially successful one – and that’s why we’re committed to making sure you understand your options fully before making that investment.

What is the Federal Tax Credit for installing solar panels?

The federal solar tax credit, known officially as the investment tax credit (ITC), currently allows you to deduct 30% of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value. For information on other available incentives for going solar, you can click here.

How is the Federal Tax Credit Changing?

In 2020, however, the 30% federal tax deduction is scheduled to reduce to 26%. Naturally, the 4% drop equates to a different amount of money depending on the size of the solar install, but on average it’s can mean hundreds if not thousands of dollars lost on potential savings.

The 26% rate will be in place for 2020 before being reduced once again to 22% in 2021 and then will be eliminated entirely for residential installs in 2022 and reduced to 10% for commercial installs that same year. The 10% rate for commercial installs will continue indefinitely.

What does this mean for you?

Due to popular demand and supplemental incentives slashing costs, solar installations have been flourishing within the U.S. market over the past 10 years. In fact, within the past 5 years the cost of a solar installation has dropped significantly, largely due to the global growth of mass production in equipment manufacturing. While the pricing mechanism for costing a solar installation still may be difficult to understand, generally speaking solar installations are sized based on a user’s past 12 month’s electrical usage or consumption. Once that is determined, a solar array is design and priced accordingly. In January 2019, the average national solar panel cost is $3.14/watt. The average solar panel system size in the U.S is approximately 6 kilowatts (kW), therefore an average solar panel system would cost $6,378 after tax credits. Naturally, every install is going to vary, but this is a good starting point. You can read more about the cost of going solar here.

In sum, 2019 is the best possible time to go solar. Simply, you don’t have to hedge your bet that material costs will continue go down in the coming years to to make up the for the incentives being cut.

Keep in mind that with the incentive decreasing, there is likely going to be an increase in installs as the year progresses, so engaging with an installer sooner rather than later is recommended.

Click here to find out if solar is right for you.