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The ITC was extended (again)! What you need to know in 2021

On December 21, 2020, Congress passed the omnibus spending and COVID relief bill, and on Sunday, December 27, 2020, President Trump finally signed it into law. In addition to keeping the lights on in our government and providing much needed financial relief for businesses and people alike who have been impacted by COVID, the 5,000+ page, end-of-year spending bill also provided a ray of bright light for the solar industry: an extension of the solar ITC. Here’s what you need to know about how the ITC extension impacts your solar project.

ITC extensions, past and present

The best solar incentive in the country is the federal investment tax credit, known as the ITC. In 2015, Congress extended the ITC for the first time, but scheduled the incentive to gradually phase out, or sunset, over the next seven years, dropping from 30% to 26% to 22% before disappearing altogether for residential properties, and remaining at 10% for commercial properties.

While the Trump Administration has not been particularly favorable towards clean energy policy, many industry analysts and insiders anticipated that the incoming Biden Administration would reinstate some policies and incentives that can spur the growth of renewable technologies in the country.

Few, however, anticipated that the lame duck session of Congress would take any action on climate policy at the end of 2020. But 2020 had one last surprise in store, this time a positive one for clean energy, with an extension of the ITC included in the end-of-year spending bill, HR 133 (careful, opens as a 5,593 page pdf).

What’s included in the ITC extension

The 2020 spending bill extends the solar ITC at its current level of 26% for two additional years, through the end of 2022, before decreasing to 22% in 2023 and disappearing for residential properties in 2024. The spending bill maintains the 10% ITC for solar on commercial & industrial properties after it sunsets for residential properties. YearPrevious ITCUpdated ITC 202026%26% 202122%26% 2022Resi: 0% C&I: 10%26% 2023Resi: 0% C&I: 10%22% 2024Resi: 0% C&I: 10%Resi: 0% C&I: 10%

You can find the actual language extending the ITC on page 4908 of the pdf for the commercial extension (Section 48A of the tax code), and on page 4915 of the pdf for the residential extension (Section 25D of the tax code). (Major thanks to CALSSA for finding the page numbers in the bill so I didn’t have to read the whole, 5,600 page pdf!)

How much will the extended ITC save you

If you’re considering investing in solar for your home or business, the extended ITC is great news: two more years of the best solar incentive is a positive outcome for everybody.

Using data from our most recent Marketplace Intel report, solar shoppers in the top 10 solar states can expect the ITC extension to save them an additional $900-$1,300. State2020 solar prices ($/Watt)Average system size (kW)Average gross cost of solar ($)Add'l savings due to extended ITC ($) California$2.837.8$22,100$884 Florida$2.6012.7$33,000$1,320 Arizona$2.489.5$23,600$944 Texas$2.7012.2$32,900$1,316 New Jersey$2.8411.1$31,500$1,260 New York$2.9610.3$30,500$1,220 Illinois$3.059.9$30,200$1,208 Nevada$2.6210.7$28,000$1,120 Massachusetts$2.999.1$27,200$1,088 Colorado$3.108.6$26,700$1,068

Is anything missing from the ITC extension?

Not to get greedy but…

There were two primary things solar advocates were looking for from an ITC extension that didn’t ultimately make their way into the final bill: an ITC for standalone energy storage, and “direct pay” of the ITC, which would have made it more like a rebate than a tax credit.

While the creation of an ITC for standalone storage alone (i.e., storage without solar) would have been great for the industry, if you’re a home or business owner looking to invest in solar-plus-storage and planning to charge your battery with solar, then your energy storage solution will still qualify for the full ITC.

Get started saving with solar today!

Take advantage of the tax credit extension by exploring your solar (and storage!) options today. When you register for a free account on EnergySage, we’ll do the leg work for you to gather custom solar quotes for your home or business from solar companies in your area. Get started today to see how much you can save with solar!


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