Solar Tax Credits



The Energy Policy Act of 2005 created the Solar Investment Tax Credit (ITC). It set a solar tax credit of 30% of a solar system’s costs for homeowners and commercial business owners who install solar panels. The tax credit (not a write off, an actual credit to pay income taxes) stood at 30% until the end of 2019. However, in 2020 the benefit dropped to 26%.

The credit was scheduled to decrease again at the start of 2021 to 22%. However, the federal spending package and COVID-19 virus relief spending bill passed in the final days of 2020. As a result this act held the ITC at 26% for 2021. It was at 26% through the first half of 2022, and set to drop to 22% in 2023. In 2024 it was to go away completely for residential systems…

But in the summer of 2022 the Inflation Reduction Act reinstated the ITC at 30% for both residential and commercial solar. This is great news for homeowners and business owners. The ITC now stands at 30% for ten years. 

Here’s the breakdown of how the federal solar tax credit extension will work:

What is my first step?

The Federal Investment Tax Credit now provides the full 30% benefit. This solar incentive looks stable into the future; it will reduce your tax liability when you install renewable energy. However, other factors such as Net Energy Metering rates still make today the right time to get your solar system installed. Our team at HES Solar is ready and knowledgeable. We will guide you through the process. Your HES Solar system will produce renewable energy for you and also get you your maximum tax credit benefit

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Net Energy Metering 3.0 (NEM 3.0) is the incoming law created by the California Public Utilities Commission (CPUC). The new tariffs and fees will impact both residential and commercial solar systems built in California. 

As this notice is posted in November of 2022, the Proposed Decision from the CPUC outlining the proposed NEM 3.0 terms is expected soon. This comes after a year’s delay. Once the new agreement is finalized and passed into law, there will exist a designation of the deadline under which new systems will continue to qualify for NEM 2.0 rates. 

The new NEM 3.0 rates will be designed to lower the value of electricity during the daytime hours, when solar is producing, and increase the value of electricity during the evening hours, when solar homes and businesses purchase electricity. In short, NEM 3.0 will create a “sell low, buy high” proposition to new solar system owners. 

To Californians looking to install a solar system on their home or commercial building, the NEM 2.0 rates will be preferred. As of this post, the solar industry does not know the details of how different the NEM 3.0 rates will be from the NEM 2.0 rates. 

Please use the HES Solar website as a resource to learn more, and please take our offer to speak with an HES Solar Energy Consultant at no obligation.

Robert Laverty

Senior Energy Consultant, Residential

Robert Laverty joined the HES team in the summer of 2018, bringing his ten years of solar design experience and his Bachelor’s degree from the University of Puget Sound with him. Robert is dedicated to finding solutions to help families produce and store electricity in order to reduce their reliance on grid power as well as help reduce their household’s carbon footprint. Robert’s experience as a newspaper editor as well as his involvement with the sustainability-focused Rocky Mountain Institute drives him to constantly seek out innovative ways to meet energy needs through renewable resources as well as helps him share those ideas with Southern California homeowners. When not at work or volunteering time with his church or community, Robert spends time with his wife and two sons or pursues his passion of fly fishing.
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