The federal solar tax credit, officially known as the Investment Tax Credit (ITC), was increased in August from 26% to 30% and remains in effect thru 2034. If you own your home (or have a mortgage) you could qualify to receive a tax credit equaling almost 1/3 of your cost to go solar. For example, if your solar system costs $20,000 your tax credit would be $6,000. And if you owe $3,000 in federal taxes you could use it to reduce your taxes to $0. Plus, the unused portion of the tax credit can be carried forward to next year and subsequent years until it’s used up. It’s like having a voucher from the federal government to pay down your tax liability.
Only new solar installations on a primary or secondary residence qualify. Additionally, you must purchase the system outright or have a solar loa; leases and PPA’s do not qualify. The 30% ITC applies to residential and commercial installations completed and paid for anytime in 2022, even if installed before the Inflation Reduction Act was signed into law in August 2022. Also, installation invoices must be paid by December 31 (or solar loan documents completed by that date) to get the tax credit for this year.
To claim the ITC you need to fill out IRS Form 5695 when you do your taxes next year and provide your solar contract, paid receipts and loan documents.
According to the Solar Energy Industries Association (SEIA) the ITC has helped the U.S. solar industry expand by over 10,000%. It’s a terrific incentive to help homeowners and businesses generate their own electricity with clean sustainable solar power.