The federal Investment Tax Credit (ITC), also known as the federal solar tax credit, is one of the most lucrative solar incentives for homeowners. Through the solar tax credit, homeowners can claim a federal tax credit that’s worth a percentage of the total cost of their solar installation costs. As of 2023, the federal tax credit for solar is worth 30% of your total installation costs for solar panels and solar batteries.
The solar panel tax credit allows you to claim a dollar-for-dollar reduction on your federal income tax. It’s worth 30% of your total residential solar installation costs, with no maximum. So, if you spend $30,000 to install a residential solar energy system, you can reduce your tax liability by $9,000.
To claim the residential solar tax credit in a given year, your solar energy system must be installed and turned on before the end of the year. If your tax credit is worth more than what you owe, you can roll the remaining amount over and use it the following year.
Learn more about how to claim the solar tax credit.
The solar tax credit covers almost all of the expenses related to a solar installation, including:
Roof replacement costs are not included in the solar tax credit.
Most homeowners are eligible for the solar tax credit. To qualify, you must meet the following criteria:
The Inflation Reduction Act of 2022 brought some major changes to the federal tax credit for solar panels. Before the Inflation Reduction Act was signed into law in August of 2022, the residential federal solar tax credit was worth 26% and set to expire in 2024. The Inflation Reduction Act extended the solar tax credit’s timeline until 2032 and increased its value to 30 percent. Solar tax incentives like the federal tax credit make it easier for Americans to go solar so they can get rid of high electricity bills and unlock the benefits of solar system ownership.
The contents of this blog post are for informational purposes only and should not be relied upon for tax or accounting advice. You should always consult with a tax professional before making financial decisions about your solar installation.
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