In the face of environmental concerns, the buzzword “sustainability” has taken center stage in the business world. From mom-and-pop shops to multinational corporations, conscientious companies are exploring ways to reduce their carbon footprint and embrace renewable energy.
One of the most enticing options? Solar energy.
What if we told you that there are government measures like solar tax incentives designed explicitly for establishments to make the switch? They bring substantial savings, making the transition to solar not just an environmentally savvy move but a financially astute one, too.
The Federal Investment Tax Credit Is Your Green Ticket to Savings
The Federal Investment Tax Credit is a dollar-for-dollar reduction in the income tax bill that a person or company would otherwise pay to the federal government. Essentially, it allows you to deduct a portion of solar costs from your taxes, which is a significant boon for businesses going green.
Thanks to the Inflation Reduction Act, the ITC offers a 30% tax credit for solar systems on commercial properties. This means that if you outfit your space with a solar system worth $100,000, you can receive a $30,000 credit on federal taxes.
Unless Congress renews the ITC, this benefit will no longer cover solar projects constructed in 2032 or the year the Treasury Secretary determines at least a 75% reduction in annual greenhouse gas emissions from the national electricity production as compared to 2022. If you’re considering an installation, you may want to get the ball rolling sooner rather than later to claim the tax credit and capitalize on these savings.
Going Beyond the 30%
Unlike the residential clean energy credit that only covers 30%, commercial establishments can earn more federal tax credit by meeting the criteria:
- 10% if your installation involves at least 40% U.S.-produced components
- 10% for projects located within an energy community or sites near coal plant closures and brownfield land
- 10% for installations located in low-income communities or tribal land with less than a five M.W. capacity
- 20% solar tax incentives for construction involving economic benefit systems or low-income residential building projects with less than a five M.W. capacity
What About Solar Tariffs?
Solar tariffs, also known as solar import taxes, are another important factor to consider in your equation. Initially introduced to protect domestic manufacturers from cheap foreign imports, these government fees can subtly impact the overall cost of your solar installation. The good news is that they’ve winded down a bit.
The Trump administration implemented a four-year tariff schedule in 2018, starting at 30% and gradually decreasing to 15% by 2021. During this period, 2.5 gigawatt cells and bifacial cells received exemptions, but in 2020, President Trump increased the rate to 18% and revoked the exclusion of bifacial cells. President Biden extended the existing tariffs for four additional years with a few modifications:
- Increased the tariff quota to five-gigawatt cells and modules
- Renewed the exemption of bifacial-type solar cells
- Lowered the rate to 15%
More recently, in June 2022, panels from Southeast Asia received a two-year tariff exemption in response to the Commerce Department’s inquiry into possible trade violations involving Chinese products slowing down the supply chain.
Why Source Your Solar Panels Domestically?
Besides the typical solar tax incentives and beyond completely bypassing the tariff-related hassle and potential added costs, there are several compelling reasons to consider locally manufactured products. These include:
- Quality assurance: American-made solar panels adhere to rigorous quality standards, ensuring consistent performance and durability. You can rest assured knowing you’re investing in top-tier, long-lasting equipment.
- Easier maintenance: Domestic manufacturers are typically more accessible for after-sales service, warranty issues, and upkeep. This proximity promotes quicker response times and less downtime in the unlikely event of a hiccup.
- Boosting local industry: With local products, you’re contributing to domestic economic growth. It’s a tangible way to keep jobs in the country and foster innovation within our borders.
- Reduced carbon footprint: Local procurement means less transportation and, consequently, lower CO2 emissions. Think of it as a bonus on your sustainability scorecard!
- Promoting energy independence: Sourcing your systems in the U.S. supports the nation’s move toward self-sufficiency in energy production, reducing our dependence on foreign oil.
Remember, quality is key. Getting top-grade solar equipment that meets our high national standards ensures not only efficiency but also longevity — a critical aspect to maximize your return on investment.
Quality for the Biggest Benefits of Solar
The complexities of the solar business might seem daunting, but they don’t have to be. With the right guidance and expertise, you should expect a smooth, profitable, and deeply satisfying transition.
At Verde Solutions, we’ll help maximize your solar tax incentives, ensure compliance with all regulations, and help you capitalize on every conceivable benefit. Call us at 800-541-1137 for a brighter, sustainable, and economically smart future for your business.
