26% Federal Solar Tax Credit Extended
Federal ITC

Solar Tax Credit Extended

The Federal Investment Tax Credit (ITC), commonly known as the Solar Tax Credit was scheduled to drop from 26% to 22% in 2021. It has now been extended and will stay at 26% for two more years.

[Update] December 28th, 2020: President Donald Trump has signed the COVID relief bill. The 26% ITC extension has now been signed into law.

Congress Passed COVID-19 Relief Bill

Both houses of Congress on December 21, 2020 passed a massive 5,593-page mash-up of legislation that included Covid-19 relief to millions of distressed Americans. A two-year extension of the Federal Investment Tax Credit (ITC) for solar systems and new funding for energy storage research was included in the pandemic relief package.

filing solar tax credit

The legislation passed the House by a margin of 359 to 53 and the Senate in a 92-6 vote. The COVID-19 relief bill now goes to the White House for signing by President Trump.

This bill provides a two-year extension of the solar Investment Tax Credit (ITC). It also provides for additional funding for research and development and support for federal land access for renewable energy projects. It included no provisions for energy storage.

Solar ITC to Remain at 26% in 2021 and 2022

Under the legislation, the Solar Tax Credit will remain at 26% for projects that begin construction in 2021 and 2022. The step down to 22% will occur in 2023 and then drop to 10% in 2024 for commercial projects. In 2024 the residential credit ends ultimately. Having fallen from the previous 2020 Solar Tax Credit of 30% in January, the Federal Tax credit was to drop to 22% next year. Solar companies beginning construction on renewable energy projects in 2021 would still have four years to place their projects in service in order to utilize the Federal ITC. With the deadline for projects placed in service reset to before Jan. 1, 2026.

The $900 billion COVID-19 package also includes funding for distributed energy deployment. As well as support to provide better access to federal lands for renewable projects. The 5,593-page legislation, the longest bill ever passed by Congress, is expected to be signed into law by President Trump.

Impact of the 26% Solar Tax Credit Extension

The legislation also includes the Better Energy Storage Technology (BEST) Act, which authorizes US$1 billion over five years for federal innovation investments in energy storage technology research, development, and demonstration. According to the US Energy Storage Association (ESA), the act establishes a new competitive grant program for states, utilities, and companies to deploy storage in various applications.

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An extension of the ITC was among the policy priorities put forward by the Solar Energy Industries Association (SEIA) following last month’s presidential election. Abigail Ross Hopper, CEO of the SEIA, said in a statement yesterday:

“Over the next few years, we have an opportunity to build a stronger, more reliable and more equitable American energy economy, and the action Congress is taking today is a helpful down payment.”

Abigail Ross Hopper, CEO of the SEIA

She added that SEIA would make ITC benefits available as a direct payment to augment solar energy growth. Calling for sufficient funding to support programs to accelerate the adoption of solar. Such as ways to accelerate the solar project permitting process. “There is bipartisan consensus on many of these issues, and we look forward to working with the incoming administration and the 117th Congress on future pro-solar policies even as we are grateful to this Congress for their actions today.”

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