The ITC has helped commercial entities transition to solar and pushed growth across the country since 2005. The tax credit incentivizes going solar by allowing businesses to deduct 26% of the installation cost from their income taxes. However, this number will only sit at 26% for the remainder of 2022. It is expected that following 2022 the rate will drop to 22%, and the following year to just 10% permanently.
The ITC has put a tax law in place called safe harbor, this allows businesses to lock in to the 26% if they begin the construction on their solar project prior to the end of 2022. There are two ways to qualify for the safe harbor. (1) You must invest 5% of the eventual total project cost. (2) Begin physical work on the project.
The IRS’ definition of project cost to safe harbor is the equipment including panels, inverters and racking. Safe harbor this can be achieved easily through the purchase of the panels, locking in the 26% rate while also locking in panels protecting you from future panel price increases.
Physical work refers to providing concrete evidence that work has begun on the project. This constitutes as work being done by the owner, contractor or subcontractor. There is no fixed minimum or threshold required to satisfy the physical work, so long as there is a contract in place and an assumed risk.
Genie Solar’s experts can help ensure your contract is secured and panels are sourced to safe harbor the 26% before year end. Speak to a solar expert today!