How does a 30% Savings Sound?
The Investment Tax Credit (ITC) provides individuals or businesses that make investments in solar energy a reduction in their overall tax liability. For solar-electric property expenditures, the credit is 30 percent of the installed system cost. Additional business owned systems may also be eligible for MACRS 5-year Accelerated Depreciation using IRS federal form 4562
ITC Extension (October 2008) Link to Bill
On Friday, October 3, 2008, H.R. 1424, the Emergency Economic Stabilization Act of 2008, passed the U.S. House of Representatives with a vote of 263-171. Soon after, President Bush signed the bill into law. This bill contains additional provisions supporting solar, which include:
- 8-Year Extension of the commercial and residential solar investment tax credit
- Completely eliminates the $2,000.00 monetary cap for residential solar electric installations
- Allows utilities and alternative minimum tax (AMT) filers to take the credit.
History of the ITC
The ITC was first established under President Carter’s administration with the Energy Tax Act of 1978 and provided a 15 percent tax credit for solar energy. This credit continued uninterrupted for 8 years until President Regan signed into law the Tax Reform Act of 1986 which provided for a phased reduction of the ITC. On January 1, 1987 the credit fell to 12 percent. On January 1, 1988 the credit was reduced to 10 percent and the credit remained at this level until 2005.
The Energy Policy Act of 2005 is a statute that was signed into law by President George W. Bush on August 8 2005. The Act was as an attempt to combat growing energy problems and helped spur change in the US energy policy by creating a new commercial and residential ITC for solar energy systems that applied from January 1, 2006 through December 31, 2007.
Residential customers can click this link for the 2007 federal tax form in PDF format:
IRS Form 5695 for Residential Energy Tax Credits