What You Need to Know About the 2021 Solar ITC Extension

Solar installers across the U.S. were excited on Dec 28, 2020, when the federal solar investment tax credit (ITC) was extended. The ITC, which was initially going to begin phasing out at the end of 2020, received a much-needed two year extension.

The extension will provide an extra incentive for going solar until 2023. After overcoming a tough year, solar installers now have another useful tool to convince frugal prospects that going solar is financially feasible. 

Here’s a quick breakdown of how installers and homeowners can benefit:

What Is the ITC?

Here are a few core points you should know about the Investment Tax Credit (ITC): 

Updated Extension Plan

The original plan for the ITC looked like this:

According to this plan, owners of solar projects which began construction between Dec. 31, 2020 and Dec. 31, 2021 would have only received 22% back in federal tax credits. After Jan. 1, 2022, residential solar systems would have become ineligible and commercial systems would have only gotten back a 10% federal tax credit. 

Fortunately for the solar industry, the extension gives everyone more time:

2022

Instead of dropping to 22% at the end of 2020, the tax credit has been frozen at 26% for all solar projects which commence construction between Jan. 1, 2021 and Dec. 31, 2022. This extension includes residential, commercial, industrial, and utility-scale arrays.

2023

The current plan mandates that in 2023, the tax credit for all solar projects will drop to 22%. 

2024 and Beyond

Beginning in 2024, residential projects will no longer receive a tax credit. However, commercial and utility solar projects will retain a permanent 10% credit.

How Can Solar Installers Take Advantage of the ITC Extension? 

The ITC extension gives solar installers several opportunities. The primary benefit lies in the fact that in a still-recovering economy, prospects are more money-conscious than ever. These frugal leads will be more willing to go solar if assured of a larger tax credit, so make sure they know about it. Incorporate education on the ITC extension into your solar sales strategy; for example, have your marketing team develop ITC-focused content and ads, and have sales consultants explain the extension to their prospects individually.

Installation teams can also benefit from the extension. Previously, the looming deadline for construction commencement could have resulted in a bottlenecked glut of new projects in mid/late 2021. But now, since projects begun in 2022 will receive the same tax break, buyers and teams are no longer harried by the knowledge that time is running out. According to Wood-Mackenzie, installation teams will no longer feel the pressure to commence construction on an overwhelming number of projects at one time. This allows them to make extra sure (as always) that their solar installations are known for sturdiness and safety above all else. 

The ITC Extension: a New Opportunity

For motivated solar installers, the ITC extension gives a welcome chance to reach prospects with the message that these next two years are the time to go solar. And for the economy as a whole, it’s a much-needed shot in the arm. 

All in all, it’s great news for the solar industry. If you’re looking to take advantage of this opportunity, one great place to start is by watching Kenneth Williams’ free walkthrough on his how to sell storage using a consultative approach. By leveling up your sales skills for these and other ITC-eligible projects, you’ll have the tools to grow your business in 2021 and beyond. 

Allison Ruedig

Allison Ruedig is a freelance copywriter who specializes in solar and cleantech content. She has enjoyed creating email campaigns, blog posts, ebooks, and lead magnets for numerous renewable energy companies.