Solar Tax Credits | What’s Available in 2021

Individuals and businesses in Maryland have state and federal solar incentives available to encourage them to invest in solar PV (photovoltaics). Solar panels convert light into electricity. Programs differ depending on whether one is getting solar panels for residential or commercial purposes. A Maryland tax attorney can answer your questions about what’s available in 2021 for solar tax credits.

Tax credits have great value for individuals and business owners. With a tax credit, you get a direct offset against the taxes that you owe the government. A standard business or personal deduction, on the other hand, only reduces your taxable income.

Federal Tax Credits for Commercial Solar PV

Companies that invest in commercial solar photovoltaics (PV) can claim a tax credit on their federal corporate income taxes of a portion of the cost of the solar PV system. The corporation must claim the credit for the tax year in which the system gets placed in service.

If the construction on the solar PV system started by December 31, 2019, and placed in service before the year 2024, the company can get a tax credit of 30 percent of the cost of the system. Projects that started construction during 2020 and went into service before 2024 will get a 26 percent tax credit. The credit goes down to 22 percent for projects that start construction in 2021 and go into service before 2024.

“Maryland offers grants of up to $1,000 through the Maryland Solar Rebate Program to help people buy solar equipment. ”

Companies considering investing in solar should commence the construction before the end of the 2021 calendar year and make sure the project goes into service before 2024. The tax credit plummets to only 10 percent of the cost of the system for projects that begin construction after December 31, 2021, or go into service after December 31, 2023.

Federal Tax Credits for Residential Solar PV

Homeowners have a less generous incentive program than corporations. Residential solar PV systems installed in 2021 can get a 22 percent tax credit. The residential incentive program expires on January 2022.

Maryland Solar Tax Incentives

Maryland offers grants of up to $1,000 through the Maryland Solar Rebate Program to help people buy solar equipment. Our state also has the Maryland Energy Storage Income Tax Credit Program (Program). The Program started in 2020 and is renewable for 2021 and 2022. Many people who obtain solar PV systems use energy storage systems to have the energy available at night or if a power failure occurs.

People and businesses that have installed an energy storage system on their property can apply for a tax credit. Commercial property can get a tax credit of 30 percent of the total installed costs up to $150,000. Homeowners can get 30 percent of the total installed costs up to $5,000. Maryland set up a fund of $300,000 for residential taxpayers and $450,000 for businesses. The Program will not pay more than a total of $750,000 in any tax year. The money gets distributed on a first-come, first-served basis, with a waiting list.

A Maryland business attorney can help you develop a solar equipment investment strategy. This article is for informational purposes only and does not constitute tax advice. Please talk to your tax advisor.