An Inside Look for Investors at the Benefits of Solar Investment Tax Credits

Hand holding money in front of solar panels for investment tax credit.Renewable energy generated from wind, solar, geothermal, and hydro sources increased by nearly 8% in 2022, accounting for over 5% of the world’s total energy supply. With the rise of renewable resources, this sector has become popular with investors looking to combine environmental responsibility and the potential for financial growth.

Solar investment tax credits are one of the most compelling reasons for the recent surge in interest in renewable energy. They offer investors an opportunity to support sustainability goals while maximizing the possibility of generating a source of passive income. While the solar Investment Tax Credit (ITC) was set to expire in 2022, it was extended until 2034 as part of the Inflation Reduction Act (IRA). These solar production tax credits offer the potential for significant tax savings while also encouraging investors to support sustainable energy resources that offer an eco-friendly alternative to traditional sources.

Continue reading as we explore strategies for investing in solar investment tax credits, how ITCs may influence solar investments, and how utilizing these tax credits can help investors strengthen their portfolios while helping to drive the world energy market toward a greener future.

How Exactly Do Solar Tax Investment Credits Work?

Originating in part of the Energy Policy Act of 2005 and extended by the Biden administration in 2022, solar ITCs have been a key strategy for the US government for sparking interest in renewable energy. Two types of tax credits are available for businesses: investment tax credit (ITC) and the production tax credit (PTC):

  • The ITC allows businesses to reduce their federal tax liability for a percentage of the cost of a solar system installed during a tax year, with systems installed between 2023-2033 eligible for a 30% tax credit.
  • Whereas the PTC is a credit for the actual electricity generated by the solar system (or other qualifying green technology) for the first 10 years that system is in operation.

Investors also have the opportunity to participate in ITC transfers. In an ITC transfer, a solar energy developer sells a tax credit to a buyer with taxable income. The seller receives a one-time payment and the buyer reduces their tax liability. The transaction for the purchase of the ITC is at a lower amount than the value of the tax credit, which offers the investor the potential to make a profit on the exchange.

By leveraging ITCs, investors can reduce their tax liabilities while enhancing their passive income potential by earning long-term returns from solar energy investments.

What are the Benefits of Solar Investment Tax Credits

The benefits of investing in solar ITCs can be divided into two primary categories — economic and environmental.

The Economic Advantages of ITCs

  • It stimulates economic investment in the clean energy sector. Money follows money, and these tax credits help to spur investment by offsetting the total costs of renewable projects. This makes new investment possible, which in turn grows this segment of the economy.
  • Investors gain the potential to realize significant savings on their annual tax bill by investing in large solar projects using ITCs.
  • Investments spur growth in the renewable energy market, improving the infrastructure needed to support clean energy projects, such as wind turbines and solar panels. This helps to reduce the cost of clean energy, making it more affordable to consumers.
  • Growth in the renewable energy market means new jobs and construction, which boosts the economy as a whole.

The Environmental Advantages of ITCs

  • Clean energy works to combat the negative effects of climate change by reducing greenhouse gas emissions caused by traditional energy sources.
  • Investment encourages the use of environmentally friendly technologies. Homeowners and businesses that take advantage of tax incentives to install solar panels will contribute to more widespread use of green technologies throughout society.
  • Corporations love a winner. Showing the profitability of renewable energy through other businesses’ success with ITCs will lead more businesses to see the benefits of green technologies over traditional ones. This will lead to more investment in the green energy sector, which will contribute to the development of new green technologies.

Vistia Capital Can Help Investors Make Sense of ITCs

Thanks to solar ITCs, investors who want to participate in the advancement of renewable energy technologies can now meet their sustainability goals in a financially sensible way. By investing in solar projects, investors have the potential to realize immediate gains in tax breaks while also generating passive long-term income from solar power generation.

Entering into the dynamic investment sector requires the assistance of an experienced advisor who understands the complicated tax laws surrounding ITC investments and can steer investors toward projects that offer stability and the potential for future success. At Vistia Capital, our solar tax investment credit experts can help you make sense of your solar options so you can feel confident that an opportunity meets your financial and sustainability goals.

Schedule a solar energy consultation with the Vistia Capital team today and take the first step towards a brighter financial future.

Investment Tax Credit FAQs

What are solar investment tax credits (ITCs)?

Solar investment tax credits (ITCs) are incentives provided by the government to encourage investments in solar energy projects. These tax credits allow businesses to reduce their federal tax liability for a percentage of the cost of a solar system installed during a tax year.

How do solar tax investment credits benefit investors?

Solar tax investment credits benefit investors by offering the potential for significant tax savings, stimulating economic investment in the clean energy sector, and contributing to the growth of the renewable energy market. Investors can also earn passive income from solar energy investments.

What is the difference between the investment tax credit (ITC) and production tax credit (PTC)?

The investment tax credit (ITC) allows businesses to reduce their federal tax liability for a percentage of the cost of a solar system, while the production tax credit (PTC) is a credit for the actual electricity generated by the solar system for the first 10 years of operation.

How can investors participate in ITC transfers?

Investors can participate in ITC transfers by purchasing tax credits from solar energy developers. The seller receives a one-time payment, while the buyer reduces their tax liability. This allows investors to potentially profit from the exchange of the ITC.


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