Post updated Aug 16, 2022.
What exactly is the Federal Investment Tax Credit (FITC)? Watch StraightUp Solar’s own Professor Ky the Solar Guy explain how it works. Though he uses 2020’s rate of 26% as the example, the principle is the same except the credit is now 30%.
How Does it Work?
The FITC is a dollar for dollar credit against your tax liability – not a deduction. This credit covers 30% of your total solar project costs. For example, if you owe $5,000 in taxes, that $5,000 is your tax liability. If you bought a solar system for $20,000, 30% of that system cost is $6,000. You can apply your $6,000 tax credit against your $5,000 tax liability. In this case, you would pay no taxes the first year, and apply the remaining $1,000 toward taxes the second year. To learn more about solar incentives and financing options, visit our Illinois or Missouri financials pages.
To find out how much you can save with incentives, start your solar quote here.
Disclaimer – we are not tax professionals, we are solar experts. Please consult with your tax advisor to see how the Federal Investment Tax Credit can work best for you.
30% Federal Investment Tax Credit Set for 10 Years!
In August 2022, the Inflation Reduction Act became law. Its provisions supported solar growth by increasing the Federal Investment Tax Credit and lengthening the deadline of the credit. Receive 30% of the full system cost back as a credit against your total tax liability for the year your system was installed. This tax credit is 30% for systems ‘placed in service’ between January 1, 2022 and December 31, 2032. The credit then drops down after that.
The tax credit is non-refundable and requires that you have a tax liability to be eligible. The excess credit can be carried over for 1 year. The home must be owned by the taxpayer but they don’t have to be the resident. For example, if you rent your home or if you have a vacation home, you can apply the tax credit to that property. Consult your tax professional to find out how this credit can work best for you. Visit energy.gov for a full homeowner’s guide to the federal tax credit.
Solar Industry Growth
Since the implementation of the Federal Investment Tax Credit, the solar industry in the United States has grown by 10,000% – creating thousands of jobs, and adding megawatts of clean energy onto our grid. Want to learn more about the history of the Federal Investment Tax Credit, and what organizers are doing to defend it? Visit the Solar Energy Industries Association website.
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