What is the Federal Solar Tax Credit?When you install a solar system in 2021 or 2022, 26% of your total project costs (including equipment, permitting and installation) can be claimed as a credit on your federal tax return. If you spend $10,000 on your system, you owe $2,600 less in taxes the following year. The solar tax credit steps down to 22% in 2023, and expires for residential installs in 2024.
How Does the Federal Solar Tax Credit Work?
Right now, the Solar Investment Tax Credit (ITC) is worth 26% of your total system cost. This includes the value of parts and contractor fees for the installation. So say it costs $10,000 to buy and install your system, you would be owed a $2,600 credit.
You can claim the credit in the same year you complete the installation, so you can claim the full 26% if you install your system before the end of the year 2022. The tax credit plays a major part in the return on investment you see from going solar. Solar Battery Storage Systems pay for themselves either way, but claiming the credit allows you to realize more immediate savings. We can’t recommend enough that you capitalize on the full 26% credit, because the value only shrinks after 2022.
- Residential %
- Commercial %
Who is Eligible to Claim the Federal Solar Tax Credit?
If you purchased a solar system before the end of the year, and owe federal taxes in the US, you are eligible for the tax credit.
Eligible solar systems also must have been purchased after Jan 1, 2006 (so if you’re buying now, you’re fine!) and before the end of the most recent tax period in order to claim the credit on your tax return.
How do I claim the Federal Tax Credit?
Our first bit of advice is to keep all your receipts from the start of your solar installation project. Like any tax incentive, the Federal Solar Tax Credit requires a paper trail. The more you spend on your project, the larger your credit – so make sure to keep track of everything!
Costs will vary depending on the approach you take to installation. The good news is that hiring a contractor is an expense that can be claimed. For residents of CA, we recommend you check out the California solar tax credit page. If you need help from a solar designer, get in touch with us for a consultation. We’re happy to walk you through any questions you may have.
Here are some of the expenses that you are allowed to claim:
- Solar equipment
- Freight shipping costs
- Solar consulting fees
- Professional installer fees
- Electrician fees
- Engineer fees
- Tools bought or rented
- Wiring, screws, bolts, nails, etc.
- Equipment purchased or rented (scaffolding or a man-lift, for example)
- Permitting fees
- Permitting service costs