Understanding the Federal Solar Tax Credit Changes In 2021

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Jan 22, 2021

Understanding the Federal Solar Tax Credit Changes In 2021

Many people are unaware there were recent changes made to the Federal Investment Tax Credit for solar. As part of the most recent Covid-19 economic stimulus bill, several tax incentive programs were extended for two years including the one commonly referred to as the Federal Solar Tax Credit.  This incentive was created in 2006 to incentivize homeowners and businesses to make the transition to clean, renewable energy. There were previous extensions of the incentive however this extension was a surprise to many in the solar industry. 

In late 2020, installers across the country (including Puget Sound Solar) raced to install as many systems as possible for their customers before the end of the year, when the tax credit was scheduled to drop by 04%. This was a change with real financial implications.

For example, a 26% tax credit on a $25,000 system is $6,500 and a 22% tax credit is $5,500, a difference of $1,000.

The Federal Solar Tax Credit is 26% in 2021 and 2022. It drops to 22% in 2023. In 2024, there is no tax credit for homeowners and a 10% credit for businesses.

The tax credit applies to the entire cost of the solar photovoltaic system including related materials and labor. If electrical work needs to be done, like upgrading your electrical panel, that also qualifies for the tax credit. Replacing your roof is not considered part of the solar tax credit. If you are building a structure to support the solar, like a ground-mount, an awning or a carport, that qualifies for the solar tax credit. (It’s always best to consult with your tax advisor for clarification.)

Other Washington Solar Incentives In 2021

Washington State has a sales tax exemption for solar, roughly a 10% savings, depending on the County where you reside. In Seattle, it means a homeowner can save roughly 36% off the full costs of going solar when combined with the Federal Tax Credit.

Net-Metering is another important solar incentive in Washington where you trade kilowatt-hours (kWh) with your utility. If your home or building is producing more electricity than it is using, the excess flows out to the grid, building kilowatt credits with your Utility, a.k.a., “running your meter backward.” We get 74% of our solar access over six months of time, spring, summer and early fall, so Net-Metering essentially serves as your “storage” for over-production during the sunny months that you get back on a 1-1 basis from your Utility as needed.

Even More Value For Your Money With Puget Sound Solar

Puget Sound Solar installed the first licensed, grid-tie solar photovoltaic system in Seattle back in 2001. We are the most experienced solar installer in the Pacific Northwest and several of our employees have been with the company for more than a decade. That experience is valuable, unmatched and our pricing is highly competitive.

Puget Sound Solar also offers an industry-leading 25-Year Workmanship Warranty, a 10-Year Performance Guarantee and 10-Years of Solar Monitoring to give you peace of mind that your system will work as we promise, for decades to come.

Give us a call at 206-706-1931 or fill out our Get Started form to get a free customized solar quote that meets your electrical needs and budget.

Jeremy Smithson

About The Author - Jeremy Smithson

Started Puget Sound Solar in 2001 with 30 years of construction contracting experience, and a desire to turn Seattle on to solar energy. Achieving NABCEP certification in 2004, Jeremy believes that our customers often follow a path similar to the one he took, starting out with solar daydreaming, then progressing to education on the subject, and eventually leading to action. In addition to leading the company he also does some teaching and speaking engagements about various aspects of solar energy, and experiments relentlessly with various solar, energy efficiency, and electric vehicle projects.

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