Late last year, Congress passed a huge spending bill which includes nearly $35 billion dollars in energy development and research and a 2-year extension of the current Investment Tax Credit (ITC) for solar power, which was scheduled to drop to 22% in 2021 and disappear completely in 2022.
Both residential and commercial will retain the 26% ITC for 2021 and 2022, then drop to 22% for 2023. After 2023, the residential credit will drop to zero, while the commercial credit drops to 10% for large scale/utility projects.
The ITC may be applied to your entire solar system installation cost (materials and labor), as well as batteries and any other onsite preparation, such as replacing your electrical service panel, rebuilding electrical service, or reinforcing roofs. There is no maximum or cap on this amount. The solar system must be installed on you primary or secondary residence, and the system must be installed by December 31 of the same tax year in which the homeowner plans to use the credit. Even if you don’t have enough tax credit liability to claim the entire credit in one year, you can forward the remaining tax credits into future years for as long as the tax credit is in effect.