Sep 20, 2022
Read Time: 3 min
Are you looking for a way to reduce your tax liability and maximize your return on investment? You should consider installing a commercial solar energy system to take advantage of the solar tax credit.
But how does the solar tax credit work? What else does your business need to know to take advantage of this valuable tax credit?
Here’s an overview of how the solar tax credit works and whether your business is eligible.
The solar investment tax credit (ITC) is a federal incentive to help businesses offset the cost of installing a solar energy system. It was created as part of the Energy Policy Act of 2005 to encourage companies to invest in renewable energy. It has been successful in driving solar adoption across the country, as the solar industry has grown by more than 10,000%.
The ITC is a rebate on your solar installation costs, which means you'll get the credit as a refund when you file your taxes. The credit is a percentage of the cost of the installation, and it can reduce your business's tax liability. You can claim the solar tax credit in the year that you begin installing your solar system and have paid 5% of the total project cost.
The value of the ITC depends on how much your business spends on solar installation. The solar tax credit can help you pay for installing a commercial solar energy system. Eligible project costs may include solar panels, inverters, circuit breakers, energy storage devices, sales tax, and labor.
The Inflation Reduction Act of 2022 has increased the tax credit from 26% to 30% and will remain at that level until 2032. The ITC is equal to 30% of the cost of the installation, with no upper limit. The credit would apply to any solar energy system installation in 2022, even if you installed it before the act was passed, and will drop back to 26% for commercial properties in 2033-2034.
Your business must meet a few requirements to be eligible for the ITC:
If your business meets all these criteria, you can claim the solar tax credit when you file your taxes for the year that you install the system. The credit will reduce your tax liability dollar-for-dollar, up to the maximum amount of the credit.
For example, if your business owes $500,000 in taxes and installs a solar system that qualifies for a $300,000 tax credit, your taxes owed for the year that you installed your solar energy system will go down to $200,000.
The extension of the federal solar tax credit is good news for businesses that want to go solar. With the ITC in place, you can reduce your tax liability and get a better return on investment in a shorter amount of time. If your business is ready to install solar and claim the ITC, partner with Geoscape Solar. It’s committed to helping companies go solar and take advantage of the many benefits of a solar energy system. Its team of experts will help you find the best financing option for your business and maximize your options for the fastest return on investment.
At Geoscape Solar, we help businesses utilize solar energy for profit. Your business will become energy independent, be able to decrease utility costs, and leverage available solar incentives for a quick ROI.
To discover how installing solar energy on your property will increase your business profitability, contact one of our energy specialists!