Everything You Need to Know About Commercial Solar Tax Credits
Commercial solar tax credits, also known as Federal Business Energy Investment Tax Credits (ITC), were set to expire in 2016, but the extension that was passed by Congress in 2015 ensures that energy projects that are started in 2017 and for some years beyond, are still eligible for solar tax credits from the federal government. This guide will explain how much businesses can be awarded in tax credits for their solar installations.
How Much Can a Business Expect in Solar Tax Credits?
Under U.S. Code Title 26 (Section 48(a)(3)), businesses that install solar power systems will receive a 30% tax rebate based on the cost of the installation. Companies that opt for wind power or fuel cells are also eligible for a 30% tax rebate. According to the most recent amendment, the 30% tax credit will remain in effect until 2020, when it drops down to 26%. In 2021, it will drop to 22% and then for every year after, the government will grant solar tax credits of just 10%.
In 2016, installations of microturbines and combined heat and power (CHP) systems granted businesses a 10% tax rebate, but those credits are no longer available. What continues to be available, however, is the 10% tax credit on geothermal electric systems. This credit will be available through 2022 at the very least.
Meanwhile, the installation of a large wind system will grant a company a 24% tax break in 2017. This amount falls to 18% in 2018, 12% in 2019, and then it will be removed going forward.
It is also important to remember that these deadlines have been amended several times already, so there is always the potential that this program may be extended again in the near future.
Is There a Maximum to Solar Rebate Amounts for Commercial Use?
There are maximum rebate amounts on some of the alternative energy resources, but solar is not one of them, at least for commercial installations. While homeowners are capped at $2,000, businesses don’t have a cap on how much they can qualify for. Here’s how the others break down:
- Fuel cells: Capped at $1,500 per 0.5 kilowatt (kW) of capacity
- Small wind turbines: No cap limit, but the turbine must meet the performance and quality standards set forth by either the American Wind Energy Association Small Wind Turbine Performance and Safety Standard 9.1-2009 (AWEA), or the International Electrotechnical Commission 61400-1, 61400-12, and 61400-11 (IEC)
- Microturbines: Capped at $200 per kW of capacity
- Geothermal: No cap limit
- Combined Power & Heat: Capped at an amount equal to the ratio between the actual system capacity and 15 MW
Why It’s Important for Solar Customers to Act Now
Business customers who are thinking about going solar should act now before the solar tax credits start dropping. Policies are always changing in Washington D.C., so while the federal business energy investment tax credits available under 26 USC § 48 should follow the deadlines listed above, they are never guaranteed. And, if our current administration has shown us anything, a single amendment or repeal is all it will take to slash the tax rebates we currently enjoy.
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