How Does The Federal Solar Tax Credit Work?

The short answer:

The Federal Solar ITC (Investment Tax Credit) provides a 30% tax credit for solar systems installed through 2032.

The long answer:

Here are 5 important things to know about the Federal Solar ITC.

1: It's a tax credit, not a check.

• Let's say your rooftop solar cost is $40,000. Then let's do the math: 30% of $40,000 = $12,000.
• This means you can reduce your federal income taxes that are due by $12,000.
• You will sadly not receive a big 'ol check from the government you can cash.
• If you aren't quite sure what this means, see #4 on the list!

2: You don't get the tax credit with a solar lease.

• You have to own your solar panels to qualify for the federal ITC.
• When it comes to payment plans, this means you either pay in cash or set up a loan to pay off the panels.
• When you sign a solar lease, you are essentially renting the panels from the solar company and THEY get the tax credit.

3: Your installation has to be complete before you're eligible.

• Your system has to be installed before 2032, to receive the 26% tax credit.
• Thanks to the recent extension, you've got time!

4: Talk to a tax professional.

• It's best to talk to a tax professional before you make any decisions. Every person's financial situation is unique & different.
• When it comes time to claim the credit, they will help you fill out IRS form 5695 along with your tax return.

5: The Federal ITC can expire!

• The tax credit expires starting in 2032 unless Congress decides to renew it.
• The credit will likely go down after 2032, it previously dropped from 30% to 26% in 2022 before going back up to 30%.

Important note: Different states offer their own state incentive programs in addition to the Federal ITC! Yay money!

Learn more about the Solar Federal ITC from Energy.gov.

Sounds pretty good, right?

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