When considering going solar for your home or business these days, it is helpful to think about all the moving parts.

From the Concord capital region to the quaintest, quietest of towns, residents across New Hampshire are embracing solar energy for the increased energy independence, local energy, and financial payoff. This last benefit is particularly important to folks in New Hampshire, which makes incentives a very important topic.

The biggest incentive is the Federal Investment Tax Credit or the ITC.

So, what is it? The ITC is a federal incentive that is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe (so yes, you do need income to qualify). It’s not a rebate, it’s a credit that is claimed on federal income taxes for a percentage of the cost of a solar PV (photovoltaic) system.

The current ITC is set at 26% and is set to step down to 22% for systems installed in 2023 and down to zero for residential installs in 2024. Commercial installations follow the same route of step down with the exception that the year 2024 and beyond includes a 10% credit — not zero.

Criteria to claim the credit:

Your PV system must be installed and prove that it is producing power before Dec. 31, 2022, and Dec. 31, 2023, for the 26% and 22% credit respectively. So, if you’re considering going solar sometime soon, you’re in luck.

Next, the system must be located at your residence in the United States. It can also be applied to an off-site community solar project if the electricity generated is credited against, and does not exceed your home’s electricity consumption. For commercial projects, the energy must be used by a business subject to U.S. federal income taxes.

You need to own the system. This is where the discussion of financing vs. leasing is important. Leased systems cannot take advantage of this incentive. But you’re eligible if you either bought the system in cash or financed it.

The system must be a new one or is being used for the first time as the credit can only be claimed on the “original installation.”

What does it mean that the tax credit is going down? It means a few things. If you’re deciding what your next home project is, now is a good time to put solar at the top of that list and get the biggest payback.

If you’re on the fence, there’s no need to worry. With or without this incentive, solar is still a worthwhile investment that will pay off in time regardless of how much incentives can trim off at the top. But the incentives certainly help.

We like to think of going solar vs. sticking with the same old electric utility bills as renting vs. buying a home: when you purchase a home and pay a mortgage, that monthly expense is covering the bill and investing in something. Renting, on the other hand, might as well be money flying out the window never to be seen again. It’s the same with solar. Instead of sending money to the utility month after month, you’re paying off your system, all the while, your panels are making energy for you.

Over the life of your system, which can be 25-plus years, that initial investment into the panels, inverters, and installation will be less than if you had been sending money to the utility that entire time.

“People talk about incentives decreasing like the sky is falling. And look, we want our customers to get the most out of their system, which does mean acting on this sooner rather than later. But solar will always be valuable no matter how you slice it,” said Alan Gauntt, CEO of Granite State Solar.

Author’s note: This My Turn provides a broad overview of the federal investment tax credit for people interested in residential and commercial solar PV. It does not take the place of professional tax advice or other professional financial guidance, and I would recommend reaching out to a tax expert.

(Jane Stromberg is outreach & policy coordinator at Granite State Solar in Bow.)