Follow these 7 steps to ensure your business qualifies for the ITC | Centrica Business Solutions
Follow these 7 steps to ensure your business qualifies for the ITC
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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 before the ITC sunsets.

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, currently equal to 26% 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 the ITC’s introduction in 2006, the U.S. solar industry has grown by 10,000% – with 52% average annual solar growth, according to the SEIA.

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 before it sunsets.

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 budget to include installing solar power so you can claim the highest amount of the ITC before it is scheduled to ramp down. Follow our simple checklist to ensure your solar PV system qualifies.

You must meet this criteria:

1. Your business falls into eligible sectors

  • Commercial
  • Industrial
  • Agricultural
  • Other sectors can take advantage indirectly

2. You installed eligible solar PV technology

There is a variety of eligible renewable energy technologies – one of them is a solar PV system that uses solar energy to generate electricity for your business.

3. Installed solar PV 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. The sooner you act, the more you save

The ITC is currently 26% of your system cost. You must begin construction of your system in 2021 or 2022 to qualify for the 26%. Over the next couple of years, the ITC will ramp down:

  • Now through 2022: 26%
  • 2023: 22%
  • 2024 onwards: 10%
Ensure your business qualifies for the ITC

Do you meet all of the above criteria? It’s time to plan for solar.

Maximize your energy budget by including solar into your current planning to reduce your organization’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 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 helping you navigate these opportunities for your business.