What the Solar Investment Tax Credit Means for Businesses

  • December 21, 2021

If you’re looking for a win-win for your business, you will find it in the solar investment tax credit (solar ITC). Actually, it’s a win-win-win: You promote clean energy by investing in solar energy for your business, your energy costs decrease as a result, and you get a huge tax credit.

That kind of victory is hard to come by for most businesses, and many businesses are taking advantage of the opportunity the solar tax credit presents. In this post, we take a look at the tax credit and what it means for businesses. Read on to learn everything you need to know.

Interested in the tax credit for solar investment but need capital to get your solar project going? AVANA Capital can help. Contact us today.

About the Solar Investment Tax Credit  (ITC)

The solar ITC isn’t new. It has been a part of the federal tax code since 2006, and it won’t be around forever. The credit is scheduled to scale down over time. For residential solar projects, the credit evaporates after 2023. For commercial solar projects, the credit drops from its current rate of 26% to 10% after 2023.

What, exactly, is the solar investment tax credit? It is a lot like any other tax credit. It reduces the federal tax liability of your business when you invest in solar energy for your business. 

How the Solar ITC Works

As the commercial solar tax credit currently stands, you can reduce your tax liability by 26% of what you spend on a commercial solar project. For example, if your business invests in a $5 million small solar farm to power your daily operations, your corporate tax liability can drop by up to $1.3 million — that’s 26% of $5 million.

To claim the tax credit, you have to fill out and submit Internal Revenue Service (IRS) Form 3468 with your corporate tax filing. If the solar ITC reduces your tax liability by more than you will owe in a given year, you don’t get a check from the IRS. However, you do get to roll the remainder of the credit over into the next year.

The renewable energy financing process with AVANA Capital is simple and designed to help your business create sustainable growth. Contact us to discuss your commercial solar project and how we can help.

Who Can Use the Solar ITC?

Nearly any U.S. business can take advantage of the solar investment credit for a wide variety of commercial solar projects, such as the following:

  • Rooftop and ground-mounted solar panel systems
  • Solar farms
  • Some battery storage projects

However, your business’ solar project must meet a few qualifications in order to receive the solar ITC: 

  • The solar project must be located in the U.S. in most cases.
  • The project must involve tangible property, meaning you likely won’t qualify for the tax credit through a shared solar power purchasing agreement.
  • It has to be a new project — it can’t be an existing solar installation that you now want to claim the credit for.
  • The business claiming the credit must be obligated to pay federal income taxes. In other words, charities and similar tax-exempt entities cannot claim the solar tax credit.

Get in on the solar investment tax credit while you can — there’s no need to wait for years when simple financing solutions are available through AVANA Capital. Reach out today to learn more.

Solar Investment Tax Credit FAQs

You have questions about the solar investment tax credit; we have answers. See the FAQs below, or contact AVANA Capital today.

What If My Commercial Solar Project Won’t Be Finished This Year?

If your project will be completed and in service before 2026, you can still claim the tax credit. According to the federal tax code, you can claim the 26% tax credit for a solar project that begins construction any time in 2020, 2021, or 2022 and is placed in service before the end of 2025.

Can You Claim the Solar Tax Credit More Than Once?

In most cases, you won’t be able to claim the credit more than once. However, you can carry unused financial benefit of the tax over into future years.

How Many Times Can You Carry the Solar ITC Forward?

Businesses can carry forward the solar investment tax credit for 20 years and even carry it backward one year. In other words, if the benefit of the tax credit is greater than your tax liability, you can carry the remaining benefit into future tax years and for up to 20 years until it runs out.

Go Solar and Claim Your Solar Tax Credit With AVANA Capital

The opportunity to claim a massive tax credit is not one that most businesses can afford to pass up. But to claim the solar ITC, you have to actually invest in a new solar project. The initial cost of doing so can feel like a stretch, but there is good news: You can secure a loan from AVANA Capital to finance your commercial solar project.

With a flexible, fast loan from AVANA Capital, you can have money in hand in plenty of time to start your commercial solar project and reduce your federal tax liability by hundreds of thousands — or even millions — of dollars. If you would like to learn more about our renewable energy financing solutions, contact us online today.