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How the Federal Solar Tax Credit Works

With solar prices falling and a key federal tax credit ramping down, commercial and industrial businesses are increasingly considering adding solar panels to their facilities.

One of the top incentives for building solar facilities — the federal investment tax credit, or ITC — can make solar panels an appealing option, but it’s important to understand how the program works, especially its eligibility deadlines.

Before getting into the details on the ITC, we should say the program could change soon. Congressional lawmakers are talking about extending the ITC in response to the COVID-19 pandemic. Renewable energy trade groups and others have been asking Congress to extend the ITC and to possibly give companies the option of getting direct payments instead of tax credits for their solar investments.

Solar provisions weren’t included in the $2.2 trillion coronavirus relief bill signed into law March 27. However, discussions are already underway on follow-up legislation, and the ITC measures may make it into that bill. We’ll be keeping a close eye on this.