Follow these 7 steps to ensure your business qualifies for the ITC
Leverage this guide to maximize your solar investment with the Business Energy Investment Tax Credit (ITC). To take advantage of the highest level of the ITC, it’s important to make solar a part of your energy strategy for 2019.
Solar photovoltaic (PV) installations have never been more affordable than they are today. But the Solar Investment Tax Credit (ITC) makes installing solar PV panels an even more affordable energy option by offering a dollar-for-dollar reduction in tax liability, equal to 30% of the total cost of eligible solar PV systems.
Not surprisingly, the ITC is one of the most popular green incentives in the industry. It has proven to be one of the most important federal incentives contributing to the growth of solar energy adoption in the U.S. Since its introduction in 2006, the ITC has resulted in 59% compound annual growth in the solar industry.
How does your solar PV system qualify for the ITC?
In the previous installment of this series, we discussed how the ITC maximizes your solar investment and energy strategy and the importance of leveraging this incentive in 2019, as the level of incentive will begin to ramp down in 2020.
It is therefore critical to ensure that your business qualifies to leverage the ITC. Why pay full price for your solar PV system when the federal government is providing a solution to reduce your upfront costs and speed up your payback period? Plan your 2019 budget to include installing solar power so you can claim the highest amount of the ITC before it is scheduled to begin ramping down. Follow our simple checklist to ensure your solar PV system qualifies.
You must meet this criteria:
1. Your business falls into eligible sectors.
• Other sectors can take advantage indirectly
2. You installed eligible solar technology.
There is a variety of eligible renewable energy technologies – one of them is a solar photovoltaic (solar PV) system that uses solar energy to generate electricity for your business.
3. Installed solar equipment must meet performance and quality standards.
Professional installation by Centrica Business Solutions using highest-quality Tier 1 components will ensure you meet this criteria for the ITC.
4. You meet usage guidelines.
In general, the original use of the system must begin with you (the taxpayer), or the system must be constructed by the taxpayer using a licensed and professional solar installer.
5. You own your solar energy system.
Power Purchase Agreements (PPAs) and leased solar systems do not qualify. Instead, the owner of the system monetizes the ITC and passes the savings along to your business.
6. You must complete IRS Tax Form 3468.
When you file your yearly federal tax return, you take a dollar-for-dollar credit for what your business would have otherwise owed in taxes. If you don’t have enough tax liability to claim the entire credit in one year, you can roll over the remaining credits back one year or into future years.
7. You must act now to claim the full 30%.
The ITC is currently 30% of your system cost. You must begin construction of your system by December 31, 2019 to qualify for the 30%. Beginning in 2020, the ITC will ramp down:
• 2020: 26%
• 2021: 22%
• 2022 onwards: 10%
Do you meet all of the above criteria? It’s time to plan for solar in 2019.
Maximize your 2019 energy budget by including solar into your current planning to reduce your business’s energy costs, boost efficiency and sustainability, and even generate an additional source of revenue. If you have any questions about how going solar may impact your individual tax situation, we recommend that you consult with a tax professional.
Talk to Centrica Business Solutions to develop a solar energy strategy in 2019 that’s powered by the maximum level of the ITC. In addition to the ITC, you may also be able to take advantage of state- and local-level solar incentives. We will work closely with you in order to maximize your solar investment by leveraging available incentives.
It’s worth noting that the ITC applies to a variety of energy solutions in addition to solar – like CHP. If you are considering a complete energy solution that works seamlessly to power your business, we can help you navigate this opportunity.