The Solar Investment Tax Credit, of ITC, is set to phase out over the next couple of years. The ITC is a federal incentive, available in all states for both homeowners and businesses. After 2019 the tax credit will drop from 30% to 26%. In 2021, the tax credit will drop further to 22% and in 2022 it will be eliminated.
There is no cap on the credit and can be claimed as soon as the project begins. If your project is valued at $5.4 million and begins construction in December of 2019, your business can look forward to a credit of $1.62 million. That same project begins construction in January of 2020, that drops to $1.4 million. Do you like leaving $220,000 on the table?
It is important to note, if you sign a contract December 1, 2019 construction does not begin the next day. Interconnection agreements must be approved by the utility, permits must be obtained, and materials must be ordered. Interconnection agreements with utilities can often take up to 3 months, some utilities even longer. Permits can take one day to three months depending on the complexity of the project and the municipality. Materials are an additional 4-8 weeks, sometimes less. Waiting until the last quarter of year may significantly impact your ability to claim the credit in 2019, thereby reducing the credit available.
Fun Fact: The ITC has lead to the growth of the solar industry by 1,600%! This is an annual compounded rated of about 76%.