Home Improvement Solar Tax Credit
What Is a Tax Credit?
A tax credit reduces your federal income tax liability dollar for dollar. For example, claiming a $1,000 tax credit lowers your federal income tax bill by $1,000.
Federal Residential Solar Credit
The Residential Clean Energy Credit (formerly the Investment Tax Credit) allows homeowners to claim a tax credit for 30 percent of the cost of a new, qualified solar photovoltaic (PV) system installed on a U.S. residence from 2022 through 2032. The system must be placed in service during the tax year, produce electricity for a home in the United States, and be owned (not leased) by the taxpayer:contentReference. There is no dollar limit on the amount you can claim, and unused credits may carry forward to future tax years.
What is the Federal Solar Tax Credit?
The federal solar credit lets you offset 30 percent of your solar PV system’s cost—equipment and labor—against your federal income tax for installations from 2022 through 2032. The credit phases down to 26 percent in 2033 and 22 percent in 2034. Systems must generate electricity for a home in the U.S. and be placed in service during the tax year.
Am I eligible to claim the credit?
You may qualify if the PV system is installed at your primary or secondary residence in the United States and you own it outright (either purchased or financed):contentReference. Systems must be new (first installation) and placed in service after January 1, 2006:contentReference. Beginning in 2023, battery storage paired with solar may also qualify.
What expenses are included?
Eligible costs include solar panels or PV cells, contractor labor and permitting fees for onsite preparation and installation, wiring, inverters, mounting equipment, energy‑storage devices charged exclusively by the solar panels, and sales taxes on those items.
How do other incentives affect the federal tax credit?
Utility rebates that reduce the purchase price of your solar installation must be subtracted from system costs before calculating the federal credit:contentReference. Payments for renewable energy certificates are taxable income but do not reduce the credit. State rebates generally do not reduce the federal credit:contentReference, and state tax credits do not reduce the federal credit either, although they may increase your federal taxable income.
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Rebate from my electric utility to install solar
Most utility rebates you receive for installing solar are excluded from income tax but must be subtracted from your solar system’s cost before calculating the federal tax credit:contentReference. This reduces the base amount on which the credit is computed.
Payment for renewable energy certificates
If you sell renewable energy certificates or other environmental attributes of your solar-generated electricity, those payments are generally taxable income. However, such payments do not reduce your federal solar tax credit.
Rebate from my state government
Rebates from state governments for solar installations typically do not reduce your federal tax credit:contentReference. You still calculate your federal credit on the full cost of your solar PV system.
State tax credit
State solar tax credits do not reduce the federal tax credit:contentReference. However, receiving a state tax credit lowers your state income tax deduction, effectively increasing your federal taxable income by the amount of the state credit.