Yes. The Solar Investment Tax Credit Is Ending
Look Here for Deadlines, Details, Definitions, and Everything Else You Need to Know – Including the Stuff No One Fully Understands about the ITC
Leave it to the IRS to make something incredibly complicated that should be simple.
THE FEDERAL INVESTMENT TAX CREDIT IS ENDING IN THE NEXT FEW YEARS (learn more about the ITC here). The ITC has helped businesses and homeowners across the country install solar at an unprecedented rate. With a 30% tax credit for solar installations and no upper limits or caps, the investment tax credit has increased the percentage of electricity produced by solar in the US to about 3.5%. It was below 1% less than ten years ago.
For poultry farms in particular, the investment tax credit has made solar a nearly irresistible option. The percentage of your expenses that come from electricity are much higher than many other businesses because of all the water pumping, heating and cooling, lighting, and other power needs in the long poultry houses that make up your livelihood.
With long flat roofs making solar installation extra easy, poultry farms can wipe out a large percentage of their electrical expenses by going solar. And, if you can get a USDA REAP grant at the same time (which we’ve helped many farmers – and rural businesses! – win), we’ve seen poultry farmers cancel out over 50% of their initial solar costs, and recover their expenses in just a few years.
Yes, the solar Investment tax credit is ending. The investment tax credit is set to begin expiring at the end of 2019. The details are complicated as you’re about to see. But one thing is clear:
If you want to claim a 30% tax credit on your solar installation, do not wait until the end of 2019 to get started.
Start now, or you could miss out on a big chunk of your investment tax credit.
So, let’s explore how and when the investment tax credit ends, and what you need to do, and by when, to get your full credit.
First, here’s the easy part: The 30% solar investment tax credit ends in December 2019, as we know it today. After that, it begins to scale down, first to 26%, then to 22%.
Commercial or Residential Solar?
But after that, it gets murky, in part because residential solar was placed on a separate track from commercial solar. According to Solar Power World, commercial solar gets a 10% credit after the 22% one expires at the end of 2021, but the residential solar ITC just ends right there.
“Placed In Service”
The problem is, when you start reading some of these sites closer, you’ll see this phrase: “Placed in service.”
To claim your solar investment tax credit, your solar installation must be “placed in service” by specific dates. And these dates have shifted over time. The current status seems to be that all residential solar installations have the same ‘placed in service’ end date – Dec 31st, 2021. For commercial, the ‘placed in service’ end date is Dec 31st, 2023.
That’s likely one reason different sites give different dates. Only, they don’t clarify if they’re referring to residential or commercial solar.
Also, in case you’re wondering, poultry farms are considered commercial businesses, which means the 2023 date for your system being ‘placed in service’ is what applies to you.
But, what does ‘placed in service’ even mean? According to Energy Star, it’s the date your solar installation is ready and available for use. In other words, when you can actually start producing power.
The reason for this clarification is because solar installations take a while to plan, design, and install. So the time when you first speak to a solar installation professional might be several months, or even years for larger projects, before the project actually starts producing energy.
The Baker Tilly tables give separate deadlines for when construction must begin and when the system must be placed in service before each level of the investment tax credit “ends.” For example, to get the 30% credit, they give a date of Dec 31, 2019 for construction to begin, and Dec 31, 2023 for the system to be placed in service. Again, they’re not clear if this is just for commercial or for residential as well.
But that then raises another question:
When must you begin construction on your solar installation for it to count for that year’s ITC?
When Has Solar Construction Begun?
Here we run into even more uncertainty. Renewable Energy World discusses how the IRS has ‘clouded’ the question about when construction officially has begun.
Is it when you first talk to the solar consultant? Is it when the design process begins? Is it when the first ‘shovel’ hits the ground? No one is entirely clear on this question to this level of detail.
And this is a HUGE question.
If you get a solar consultant out to your farm or house in October of 2019, and they draw up plans, but then it rains and they don’t actually install it until January, do you get the 30% credit or the 26% credit?
The IRS has not clarified to this degree of detail, as far as we can tell.
So what should you do?
If you want to take advantage of the maximum solar tax credit available to you, here’s how you should respond to all this IRS tax murkiness:
Don’t leave it up to them.
ACT NOW. Get your solar installation process started. Today.
Making this decision now could mean a difference of thousands of dollars.
And remember – in addition to the ITC, most farmers (and businesses too if they’re in rural areas!) can also apply for a REAP grant and knock off an additional percentage of their solar expenses.
Coastal Solar specializes in working with poultry farmers. We’ve installed solar panels on dozens of Georgia poultry houses. We also have completed many residential installations, and have installed solar panels for many businesses too, like Professional Eye Care (