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On the evening of Monday, Dec. 21, while most of America was switching into full-on “holiday mode” and getting ready for a much needed break, our elected officials were setting speed records in Washington, D.C. One such record was the passing of the COVID-19 Relief Bill, the largest bill ever concocted. This $900 billion behemoth, which was presented that Monday afternoon, blazed through the Senate and House with bipartisan support in just a matter of hours. It was then sent to the President’s desk for signing. Along with resources for assisting with national vaccination plans, the bill included various amendments and much-needed financial relief for individuals, businesses and industries—including solar.
In case you missed it, hidden about halfway through the 5,593 page document (on page 2,440 to be exact) is an amendment that references an extension to the Federal Solar Investment Tax Credit (ITC). The credit, which was due to step down to 22 percent starting Jan. 1, has been extended at 26 percent for a further two years through Dec. 31, 2022. After that it will step down to 22 percent in 2023 and expire completely in 2024.
Initially signed into law by President George W. Bush at Sandia National Labs right here in Albuquerque, the Energy Policy Act of 2005 provided tax incentives and loan guarantees for various types of energy production, including solar. As a result of its popularity and benefit on national job growth, the ITC received several extensions through the years. In its most recent iteration, the ITC sat at 30 percent of the value of a residential or commercial solar system from 2016 through 2019. At that point, it stepped down to 26 percent for 2020, followed by an expected additional step down to 22 percent in 2021. After 2021 the solar ITC was due to expire completely for residential customers, though businesses would continue to receive a 10 percent credit. Along with benefiting from the 26 percent ITC extension, New Mexicans can also take advantage of the state’s 10 percent solar tax credit. The state credit, which was signed into law by Governor Michelle Lujan Grisham in March 2020 and is scheduled to be available through Dec. 31, 2027, earmarks an $8 million bucket of annual tax incentives for homeowners and businesses.
The extension of the federal ITC provides a few more years of assistance to an industry that has already become the cheapest form of electricity in history. It additionally means continued assistance to homeowners looking to make the transition to clean energy and a continued upward trajectory of green energy jobs on national and local levels.
Fortunately for everyone, we here at The Paper. are not accountants. To find out how the state or federal solar tax incentives would best apply to your unique situation, always consult a tax professional.