Why is it important to shift to Solar Energy this year?
Posted On July 20, 2020
Solar energy as we all know is a renewable resource available, in plenty, all over the country. Solar Energy was first developed in 1839, by a French physicist who discovered the photovoltaic effect to produce free electrons. From there, the technology to develop photovoltaic cells has come a far way, and now more than ever, advanced research is being conducted to make these cells more efficient at lower costs.
As more awareness is being raised about global warming and climate change, many countries, with the help of UNESCO, are moving to renewable sources of energy. Solar energy is a huge contributor to clean energy production. To promote residents and commercial projects to adopt this change the government has offered an additional federal tax credit to individuals and businesses who welcome this change.
The Solar Investment Tax Credit (ITC) was established to support the growth of solar energy in the United States. It was one of the most successful projects as it sourced billions of dollars contributing to the U.S economy and generating employment. The success of this project was feasible because of its application to residential and commercial buildings. The figure below shows us the eligible tax credit over the past years and how there will be a decrease in the rate by 2022.
As we can see above the government offered a tax credit of 30% in 2019. Further, the tax credit decreases every year until there is 0% credit available in 2022. The federal tax credit can be claimed against the tax liability of residential (under Section 25D) and commercial and utility (under Section 48) investors in solar energy property. Section 25D residential ITC allows the homeowner to apply the credit to their personal income taxes. This credit can be used when homeowners purchase solar systems and have them installed in their homes1.
As we step further into August, only four months remain to be eligible for the 26% credit which will become 22% next year. Thus installing solar at this point in time would be highly advisable to reap this benefit.