Solar Energy Tax Credit score Drops In 2021

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Solar Power Tax Credit Drops In 2021

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Published on November 15, 2020 | by Zachary Shahan

November 15, 2020 by Zachary Shahan

Last year and several years earlier, a US taxpayer who had a solar panel installed on their roof was able to get a 30% tax credit on the cost of that system. In 2020 this tax credit was reduced to 26% and will decrease to 22% in the next year.

Confused What A Tax Credit Is? It’s basically cash when you owe taxes at the end of the tax year. “A tax credit is a dollar-for-dollar reduction in income tax that you would otherwise owe. For example, if you apply for a $ 1,000 tax credit, you reduce your federal taxes by $ 1,000, ”writes the US Department of Energy.

Given the upcoming cut in tax credit on solar energy and the solar energy on the roof is a decent part of Tesla’s business. The company recently tweeted a reminder of the upcoming deadline.

Order solar panels before the solar tax credit drops later this year. Pair with Powerwall to avoid power outages again! Https://t.co/gvX4KnG2ca

– Tesla (@Tesla) November 11, 2020

I recently worked with Tesla representatives on solar installation. His recommendation was to place an order in October to get the 26% credit. The system must be installed and powered on, which requires approval from your utility company. This is the major disadvantage.

– Danny (@DannyBaugh) November 15, 2020

For clarity, this policy change applies to any solar power system, not just a Tesla system. And I recommend anyone considering solar to get quotes from multiple solar installers in your area (it’s always free to get a quote). However, from what we’ve seen this year, it seems very difficult to compete with Tesla. Tesla rooftop solar PV systems ($ 100 off if you use this link, my Tesla referral link) are priced well below the national average. While the US average is $ 2.19 / watt, Tesla is now offering rooftop solar PV at a nationwide flat rate of $ 1.49 / watt – both prices take into account the federal 26% solar tax credit.

Tesla solar roof

If you don’t understand how this might be the case, note that I spoke to Elon Musk about this a few months ago and the explanation makes a lot of sense to me. The short story is that Tesla doesn’t have huge marketing / customer acquisition and financing costs. With uniform system sizes, Tesla does not spend as much time (money) adapting the system. Elon told me:

“The costs for solar modules are only ~ 50 cents / watt. Mounting parts, inverters and wiring cost ~ 25 cents / watt. The installation costs ~ 50 cents / watt depending on the system size.

“The other solar companies spend a lot of money on salespeople, advertising and complex financial instruments. We are not. “

This is one of the great benefits, or synergies, that Elon referred to when Tesla devoured SolarCity in the second half of 2016. Tesla’s brand is so well known that so many people buy cars every day in Tesla stores or on the Tesla website, basically no cost to get buyers to consider Tesla’s solar power systems too. Other rooftop solar companies have to spend a lot of money to stand in front of customers, and those additional business costs add to the price of their solar power systems.

Overall, due to years of cost reductions in solar modules, solar energy is the world’s cheapest option for new power capacities, the International Energy Agency recently reported. In the United States, solar, wind, and natural gas make up almost all of the new electricity generating capacity, and solar is often number one. While the cost of solar panels is sure to keep dropping, the US solar tax credit offers a good financial boost that has many purchases must stimulate. Of course, rooftop solar PV costs much more than large scale solar PV on a per kWh cost basis, but rooftop solar power competes with retail electricity prices rather than wholesale electricity prices.

In addition to a conventional solar system on the roof, Tesla also offers its unique Tesla solar roof – solar roof tiles that serve the dual purpose of generating electricity and acting as traditional roof tiles. This system costs more than a traditional solar system, but if you still need to replace (or build) a full roof it can be inexpensive. One of our authors has one of these Tesla solar roof systems and has explained this in detail using the calculations he has done for his own roof. (However, the price of a solar roof system is now much lower than it was a year ago.) Importantly, the US solar tax credit is also eligible for this Tesla solar roof option.

Regarding this tax credit, let’s come back to why it falls on January 1, 2021 and how the tax credit exit is planned.

At some point, Congress decided that falling solar energy costs meant the solar tax credit should expire. (Don’t mention that fossil fuels are still benefiting from various subsidies or that we urgently need to move away from fossil fuels to stabilize our climate.) The tax credit went from 30% to 26% on Jan 1st. 2020, and the next drop (to 22%) will be on January 1, 2021. Without a renewal or extension by Congress, the US solar tax credit will be completely abolished on January 1, 2022 The cheapest rooftop solar you get in the coming Years is probably what you can get now.

“The system needs to be operational during the tax year and generate electricity for a home in the US. There is no bright line test by the IRS, which means “commissioned”, but the IRS has equated it with a completed installation, “writes the Department of Energy (DOE). There is no maximum credit – the total tax credit is simply based on the cost of the system and your tax liability. “The following costs are included:

  • Solar PV modules or PV cells to power a roof fan (but not the fan itself)
  • Contractor’s labor costs for on-site preparation, assembly, or initial installation, including approval fees, inspection costs, and developer fees
  • System equalization equipment, including wiring, inverters, and mounting equipment
  • Energy storage devices that are charged exclusively by the associated solar PV modules, even if the storage device is put into operation in a later tax year until the solar system is installed (however, the energy storage devices are still subject to the requirements for the installation date)
  • Sales tax on eligible expenses. “

State or regional tax credits or discounts may also be available in your region. Check this out when you run or think about solar.

Any questions? You can find many more answers in this DOE document. Alternatively, I or others could possibly answer them in the comments.

As mentioned above, you can use my Tesla reference code – ts.la/zachary63404 – to get $ 100 on a Tesla solar system (of any type) in addition to the US solar tax credit.

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Tags: Federal Solar Tax Credit, Solar Tax Credit, Solar Tax Credit, Tesla, Tesla Energy, Tesla Solar, Tesla Solar Panels, Tesla Solar Roof, US Solar Tax Credit


About the author

Zachary Shahan tries to help society, to help itself word for word. He spends most of his time here at CleanTechnica as Director, Editor-in-Chief and CEO. Zach is recognized worldwide as an expert in electric vehicles, solar energy, and energy storage. He has reported on cleantech at conferences in India, the United Arab Emirates, Ukraine, Poland, Germany, the Netherlands, the USA, Canada and Curaçao. Zach has long-term investments in NIO [NIO]Tesla [TSLA]and Xpeng [XPEV]. However, it does not offer any investment advice (either explicit or implicit).



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