With the Federal Investment Tax Credit (ITC) being reduced from 30% in 2019 to 24% in 2020 on January 1, 2020, now is a good time to install/schedule a solar installation. A home owner can still qualify for the 30% federal tax credit with the “Five Percent Safe Harbor” provision.
Per the following IRS publication, Notice 2018-59:
Section 3: SECTION 3. METHODS FOR ESTABLISHING BEGINNING OF CONSTRUCTION
.01 In general. This notice provides two methods for a taxpayer to establish that construction of energy property has begun for purposes of the ITC under § 48. A taxpayer may establish the beginning of construction by starting physical work of a significant nature as set forth in section 4 of this notice (Physical Work Test). Alternatively, a taxpayer may establish the beginning of construction by meeting a safe harbor based on having paid or incurred five percent or more of the total cost of the energy property as set forth in section 5 of this notice (Five Percent Safe Harbor).
Both methods require that a taxpayer make continuous progress towards completion once construction has begun (Continuity Requirement). Section 6 of this notice discusses the Continuity Requirement and provides a safe harbor for satisfying this requirement (Continuity Safe Harbor).https://www.irs.gov/pub/irs-drop/n-18-59.pdf
With the “Five Percent Safe Harbor” provision, as long as a deposit of 5% of the total system cost is made this year and system activation occurs before the end of 2022, a home owner could be entitled to the 30% Federal ITC credit. This will give you and the installer time to install the system.
This is NOT tax advice. Speak with a tax professional for their guidance.
Image is a portion of a solar system on top of my house installed in 2017.