26% Federal Tax Credit Deadline

Wednesday, September 30th

It’s that time of year again; where everybody wants to have their solar system installed before year’s end. Why? So they can get their 2020 Federal Tax credit. Like most years, people want to be able to utilize their tax credit come IRS day in April 2021. However, like last year, the Tax Credit is declining again; this year from 26% in 2020, to 22% in 2021. Because of this, we have seen an increase with people urgently looking to get installed this year. In an effort to set some expectations, we have set our 2020 solar installation deadline for Wednesday, September 30th.

Showing the percentages of the ITC discounts per year starting in 2016 through 2022.

The above graphic shows the progression of the Solar Federal Tax credit. As you can see, up until 2019, the tax credit was a steady 30%. Per the scheduled Federal Solar Tax Credit phase-out, the credit went down to 26% in 2020, and will go down to 22% in 2021. Finally, the tax credit will disappear for residential projects in 2022. Due to this declining schedule, the solar industry anticipates a very high demand over the next year or so.

Solar Installation Timelines

Unlike some other home improvements, the average solar timeline is about 90 days (yes, three months). Why does it take so long? Usually, it takes about two weeks to complete the site evaluation, design and engineering. After that, we file for permits (electrical, building, SMART, utility interconnection, etc…), which takes about a month to get all the approvals. As you can see, we are already a month and a half into the solar project. So if you signed up on September 15th, you’d expect we’d be ready for your solar install by mid-November. The final step is commissioning and inspections. Unfortunately, this process is slow, about another 2-4 weeks

For a detailed solar project timeline breakdown, read our blog, “How Long Does it Take to Install a Solar System?

For a resident to receive the 26% solar Federal Tax Credit, the solar system must be installed in 2020. However, the system does not need to be in operation. For example, if the system is installed the week between Christmas and New Years, that system would still be applicable for the 2020 Tax Credit. It would not need permission to operate from the utility.

Wrinkles – Capacity and Holidays

Now let’s throw in some wrinkles – Capacity & Holidays. Let’s say 10 customers sign up the second week of September. Assuming the projects are installed in order (which in reality does not happen because each project has different permits and locations), the first few customers may get installed in mid-November, but the last few to sign up could be pushed out several weeks.

Next, let’s consider holidays; Thanksgiving, Christmas, Hanukkah and New Years. Not only do we lose working days at Rayah Solar, but for a month and a half, we also have to deal with permit offices that are barely opened. Perhaps things will be different this year, but in past years, we have seen inspectors go on vacation during these holidays, and offices closed for 3-4 days at a time. That can mean no permits issued nor inspections!

2020 Tax Credit Deadline

Based on a normal solar project timeline and higher than average demand, we have set our 2020 Federal Tax Credit Deadline for the Wednesday, September 30th. Please note, this date does not guarantee your solar project will be installed this year, but rather, it indicates the day we believe we can comfortably complete your solar installation this year. Let’s be clear, we do expect dozens of customers signing up last minute, all eagerly wanting their install to be completed in 2020. Of course, we try our best to be equitable, with a “first come, first serve” policy. But as previously mentioned, if your project gets held up in permitting, there is nothing we can do about that.

With all this said, here is our suggestion: if you are planning on going solar, we suggest you execute your paperwork sooner rather than later.

If you have any questions, please feel free to contact your Solar Consultant or contact our office at 617-564-3159.

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