How do solar tax credits work?

The Residential Clean Energy Credit 1 — also known as the Federal Solar Tax Credit—offers eligible homeowners a 30% reduction in the cost of installing solar and home backup batteries.

What is a federal solar tax credit?

The federal tax credit is sometimes referred to as an Investment Tax Credit, or ITC, though is different from the ITC offered to businesses that own solar systems. What is the federal solar tax credit?

What is the 30% residential solar tax credit?

The 30% residential solar tax credit applies to solar system components, batteries, and labor costs. Solar customers must own their system to qualify for the solar tax credit benefits.

Do solar panels qualify for a federal tax credit?

The answer depends heavily on your specific circumstances. The IRS states in Questions 25 and 26 in its Q&A on Tax Credits18 that off-site solar panels or solar panels that are not directly on the taxpayer’s home could still qualify for the residential federal solar tax credit under some circumstances.

Can I claim a solar tax credit?

To qualify for the 30% Residential Clean Energy Credit, you need to check three boxes. 1,3,4 If your solar system meets these requirements, you can claim a tax credit based on a portion of your purchase costs during tax season. For homeowners looking to claim a solar tax credit on their next return, these factors may affect the ability to file: 1

How is a solar project tax credited?

A percentage of the project cost is credited against your state income tax. Most allow unused amounts to roll forward for several years. One-time cash incentive paid per installed watt (solar) or per kilowatt-hour of storage (battery). Reduces the ‘tax basis’ meaning the federal credit is calculated on the post-rebate cost.