Go backSolar Tax Credit Savings
The Federal Solar Investment Tax Credit looks simple on paper, but your tax situation changes the outcome. Use this guide to understand what’s eligible, what it covers, and how to estimate the impact.
Contents
About the federal solar tax credit
The federal solar tax credit is a tax credit you can receive when filing your annual tax return. The credit equals a percentage of the total cost of your solar energy system.
There’s no universal answer for every homeowner — eligibility and how much you can actually use depends on your tax liability.
Eligibility
Before you can claim the federal solar tax credit, you need to meet eligibility requirements. These differ depending on whether you are installing solar on your residence or for business use.
Residential qualifications
- Your system must be providing energy to your home and be approved/in service.
- All local and utility fire/electrical code rules must be met.
- You must own the system (purchase/finance). Leases and PPAs generally don’t qualify.
Business qualifications
- Equipment must be new (not used).
- System must be used by someone subject to U.S. income taxes (with exceptions for tax-exempt orgs).
- System must be located in the United States.
What does the tax credit cover?
The credit is based on the overall cost of the solar energy system and may include:
- Solar panels, inverters, and materials
- Labor and installation
- Necessary roof repairs to install solar (not a full roof replacement)
- Battery storage (when eligible)
- Upgrades required for code compliance (service panel upgrades, trenching, meter relocation, etc.)
Tax credit rates by year
| Year | Tax Credit Amount |
|---|---|
| 2006 to 2019 | 30% |
| 2020 to 2022 | 26% |
| 2022 to 2032 | 30% (Inflation Reduction Act) |
How to use your tax credit
The credit offsets your federal income tax liability. That means you must owe taxes to utilize it, and the amount used cannot exceed your tax liability for that year.
- It is not a rebate
- It is not a check
- It is not an itemized deduction
How to file and claim your credit (Form 5695)
IRS resources: Instructions for Form 5695 and Form 5695.
Estimate your return
The best option is always your tax professional. If your tax situation is similar to last year, you can use our estimator to understand how the credit may affect you.
