If you purchase a solar system for your home and it’s up and operating before December 31, 2016, you will be able to claim a tax credit that is equal to 30% of what you spend on the system. This credit can be taken in one year or up to five.
This means that if you would have normally paid $5,000 on your taxes, and 30% of the cost of your system equates to $10,000, then you can wipe out your tax liability the first year and still have $5,000 left over for the following year.
After December 31, 2016, the commercial tax credit will drop to 10% and the residential credit will drop to zero – unless Congress extends this deadline or changes the “placed in service” component of the law to a “commence construction” provision. To take advantage of such a program your system must be bought outright, installed, and operating by Dec. 31, 2016. However, even if you lease your system, the ITC will benefit you because the company that you lease from will be able to take the credit, and it will be reflected in lower monthly payments for you.
Most people credit the ITC with the rapid growth of the solar industry, and it has contributed to pricing that lets homeowners save money on their monthly utility bill. According to SEIA (Solar Energy Industries Association) ITC has proven to help annual solar installation grow by over 1,600 percent since its implementation in 2006. The ITC has also contributed to dramatic job growth with a rate that is 20X higher than employment growth in the overall economy, at an astounding 86% increase.