federal solar tax credit

The solar tax credit: a federal energy tax credit for going solar

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The investment tax credit (ITC), also known as the federal solar tax credit, allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value. The average EnergySage Solar Marketplace shopper saves nearly $9,000 on the cost of going solar as a result of the ITC.

The history of the federal solar investment tax credit

The ITC was originally established by the Energy Policy Act of 2005 and was set to expire at the end of 2007. Thanks to the popularity of the ITC, and its success in supporting the United States’ transition to a renewable energy economy, Congress has extended its expiration date multiple times, including most recently in December 2020 to extend the ITC at 26 percent for two additional years. Now, the solar investment tax credit is available to homeowners in some form through 2021. Here are the specifics:

  • 2016 – 2019: The tax credit remains at 30 percent of the cost of the system.
  • 2020-2022: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
  • 2023: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
  • 2024: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.

How the solar tax credit works

As long as you own your solar energy system, you are eligible for the solar investment tax credit. Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect. However, remember that if you sign a lease or PPA with a solar installer, you are not the owner of the system, and therefore cannot claim the tax credit.

How do I claim the federal solar tax credit?

You claim the investment tax credit for solar when you file your yearly federal tax return. Remember to let your accountant know you’ve gone solar in the past year, or if you file your own taxes, simply use EnergySage’s step-by-step guide on how to claim the solar ITC.

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About Jacob Marsh

Jacob is a researcher and content writer at EnergySage, where he focuses primarily on current issues–and new technology!–in the solar industry. With a background in environmental and geological science, Jacob brings an analytical perspective and passion for conservation to help solar shoppers make the right energy choices for their wallet and the environment. Outside of EnergySage, you can find him playing Ultimate Frisbee or learning a new, obscure board game.

7 thoughts on “The solar tax credit: a federal energy tax credit for going solar

  1. Saradhi Rengarajan

    Can I still claim the credit if I sell my house before December 31st of the same year that the solar system was installed?

  2. Paul

    Are any associated products like a solar HVAC unit that would be installed with the installation of the solar system qualify for the 26% ITC?

  3. Brandy Handley

    If I don’t have enough tax liability to claim the full credit and will have to roll over into 2022 and some in 2023, will I still get the full 26% or will the 2023 balance be dropped down to where we only get 22%?

  4. Bill

    Several years ago, a solar installer told me that the only way I could get a tax credit for installing solar was if I was due a refund of taxes paid when I filed my return. I structure paying taxes so I keep my money during the year and pay taxes owed when I file my return, so I haven’t gotten a refund in decades. Was the installer’s statement true and is it still true today?

    Also, is the tax credit figured on the cost of the solar alone or on the cost of solar plus batteries?


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