You may have heard of the solar investment tax credit, or the solar ITC. Most commercial and industrial clients use it for large photovoltaic arrays that generate electricity for their business. But did you know the solar investment tax credit can be used towards the purchase of solar lighting?
While there are no explicit carve outs for solar lighting, the credit can be used towards equipment that uses solar energy to generate electricity. That means the small solar arrays attached to our poles, the lights, and the poles themselves all qualify for the credit!
Who Qualifies for the Solar Investment Tax Credit?
· Individuals or businesses subject to U.S. federal income taxes, and
· Individuals or businesses located in the United States
What is Eligible?
· Systems that are new, or no more than 20% used
· Systems that are not used for heating a swimming pool
What Expenses are Eligible?
· Solar PV panels, inverters, racking, balance-of-system equipment, and sales and use taxes on the equipment
· Installation costs and indirect costs
· Step-up transformers, circuit breakers, and surge arrestors
· Energy storage devices (if charged by a renewable energy system more than 75% of the time)
How much is the credit worth?
· 30% for projects commencing between 2006 and 2019, but placed in service before 2026
· 26% for projects commencing between 2020 and 2022, but placed in service before 2026
· 22% for projects commencing within 2023, but placed in service before 2026
· 10% for project commencing after 2023 or placed in service before 2025
The credit scales down over time, so the sooner you purchase your system the greater the savings. You can think of the credit as an IRS “gift card”. If you have a tax liability at the end of the year, you can use the credit. If you don’t have a tax liability at the end of the year, you can save the credit for the next year. Even if you don’t use all of it in one year, you can save the rest for later years. Here’s an example:
Year of Installation: 2022
Eligible Percentage: 26%
Solar Lighting Expense: $10,000
Tax Credit: $2,600
Cost of Project: $7,400
The clock is ticking when it comes to saving on solar installations. Use it as a way to reduce your tax liability and save on utility costs. Consult with your tax professional to determine if you and your project are eligible for the solar ITC and fill out IRS Form 3468 to claim the credit.
Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics