2020 Solar Tax Credit Changes: How Are You Affected?
Every time a new tax year comes into shape there are always some small changes that you need to be aware of, and 2020 is no different. Specifically, solar tax credit changes are on the horizon.
Ever since the Federal Solar Investment Tax Credit was introduced it has been a massive boon for the public as well as a cause for large growth within the solar power industry. This credit was first presented as a 30 percent credit on the total cost of your solar panel system, which provided a good discount on your bottom line, and your taxes. However, this is going to change.
While the tax credit was first introduced as a 30 percent credit on the bottom line of your solar panel system purchase, the new tax year will see this credit drop down to only 26 percent. Part of the reduction of the original 30 came from a House bill that went through in late-2019 which was meant to give the industry some time to adjust their performances. Unfortunately for the customer side of things, this business-first bill will result in a 4 percent loss of savings in the upcoming year.
While the reduction of the original 30 percent tax credit may sound like bad news for all, it does not necessarily mean bad news for customers and consumers. In order for retailers to keep their numbers at the level they will want, there is going to be an expectation of reduced costs throughout the entire chain of solar power system distribution and sales. Every level of the process will tighten a little as they find ways to make up that 4 percent loss that us as customers will have to endure in order to maintain their expected sales numbers.
This means that between contractors, manufacturers, and even distributors will all likely take on some of the cost saving efforts in different ways. With the solar power industry already being one with thin margins, this reduction in customer appetite may result in some entities dropping out of the race, while other bigger companies fight for market domination and success by adjusting their prices and numbers to fit what customers are accustomed to paying, or expecting.
Technological advances that are popping up as the industry ages and matures will also help bring total costs down as new materials, methods and mechanics are made more widely available.
The Future of The Tax Credit
With the 30 percent credit already dipping down 4 percent to 26 percent, it is already set to dip even lower in 2021 (22 percent), and disappears in 2022. With the sunset of this federal tax credit looming in the near future, there will be some rush for interested customers or potential clients to be a little more driven towards having their solar panel power systems installed throughout 2021 in order to maximize their tax credit benefits.
While the sunsetting of the credit is already booked, there will likely be some lobbying from within the industry to have the program prolonged. As such, there is some expectation that after 2020 there will still be some form of solar power tax credit for residential installations, even if it is a 10 percent credit that follows more inline with the commercial credit that will be sticking around. An absolute cut off of the solar power tax credit would cause a deafening blow to the environmentally-friendly and potentially very profitable world of solar energy, which would not be good for customers or businesses alike. Contact us today for more information on how you can benefit from this credit!