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Guest Editorial: Federal solar tax credit begins sunset in 2020

What Southern California homeowners need to know to go solar with a tax credit

January 24, 2020
in Editorials, Featured, Guest Editorial, Opinion
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By DANIEL SULLIVAN

One of the most significant pieces of legislation that has helped advance the deployment of both residential and commercial solar across the United States is the solar investment tax credit. Established by Congress in 2006, the investment tax credit (ITC) grants a 30% federal tax credit for the installation of a solar power system on residential and commercial properties.

A tax credit is a dollar-for-dollar reduction of the income tax you owe. For example, if you owe $1,000 in federal taxes but are eligible for a $1,000 tax credit, your net liability drops to zero. Tax credits are generally designed to encourage or reward certain types of behavior that are considered beneficial to the economy, the environment or to further any other purpose the government deems important. When you purchase a solar power system, you can claim a tax credit equal to a percentage of the cost of the project outlined by the program. This [was] 30% through Dec. 31, 2019.

Since the tax credit was implemented in 2006, two years after the founding of local solar firm Sullivan Solar Power, the solar industry has grown by more than 10,000%, with an average growth rate of 52% each year according to the Solar Energy Industry Association. The growth of the solar industry in the United States means a win for the local and national economy. It provides a new industry to supply local jobs and greater savings for consumers on electricity, which can be redistributed back into the economy. In addition to positioning the United States as a leader in global technology, investing in solar power grants political independence from foreign fossil-fuel producing countries and perhaps most importantly, promotes the development of an energy source that reduces our carbon footprint and does not contribute to climate change while powering our needs.

The solar ITC was set to expire in 2016, however, Congress passed the Omnibus Appropriations Bill which garnered bipartisan support in part because, it also lifted a ban on fossil fuel exports. The legislation extended the tax credit in full through the year 2019, with a step-down clause to commence from 2020-2022.

The step-down clause of the solar ITC is as follows:

  • 2020 – 26% for residential and commercial
  • 2021 – 22% for residential and commercial
  • 2022 – 10% commercial only

There is no better time to go solar than today, when Americans can take advantage of the federal tax credit to help pay for a solar power system which will reduce or eliminate their electric bill. Southern Californians pay a premium for energy, Southern California Edison and San Diego Gas & Electric often fall within the top 10 most expensive utilities in the United States. A typical Southern California family can pay off their solar power system within an average of five years, equaling savings of more than $80,000 within 20 years.

— Daniel Sullivan is president and founder of San Diego-based Sullivan Solar. For more information, visit sullivansolarpower.com.

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Dianne’s Corner: News, notes from county board – March 27, 2015

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