The Solar Investment Tax Credit (ITC) was first introduced in the USA by the Energy Policy Act of 2005
. To encourage Americans to use solar power, Congress proposed a solar panel tax credit worth 30% of the total solar installation cost (parts and labor), which basically meant a dollar-for-dollar reduction in the amount of income tax owed by the homeowner. For example, if the solar PV system cost
cost $15,000, you could claim a $4,500 federal tax credit back then, which would reduce your federal income taxes due by $4,500 respectively. Easy!
Thanks to its popularity and significant contribution to renewable energy development, the ITC has been extended multiple times since it was enacted in 2006. The US solar industry has grown by more than 10,000% to reach 71.3 gigawatts of solar installed capacity (as of the end of 2019), creating nearly a quarter-million new jobs and investing billions of dollars in the economy of the country. Despite the tremendous success of the Federal Solar Tax Credit, its value started decreasing dramatically in 2019.