Federal Solar Investment Tax Credit (ITC): Everything You Need To Know

US Federal Solar Investment Tax Credit (ITC)

all the details on the US government’s tax credit for residential solar panels.
Comic Strip of the Federal ITC Solar tax credit with Soanny and Joe the Solar Guy
Joe The Solar Guy and Sonny Discuss The Solar ITC Tax Credit

The solar Investment Tax Credit (ITC) is a federal tax credit you can apply to the purchase of home solar energy systems. The credit, which is applied to a home owner’s income tax, is equal to a percentage of the cost of eligible equipment.

TL;DR: If you buy solar panels you’ll get a credit on your taxes that will offset (26% in 2021) your total solar system expense.

 

How The Solar Tax Credit Works

You are eligible for the solar tax credit once you’ve purchased your solar energy system. You can “roll over,” the remaining credits into future years for as long as the tax credit is in effect even if you don’t have enough tax liability to claim the entire credit in one year. However, remember that if you lease a solar system you cannot receive the tax credit.

Basic Requirements

  • Your solar system must be installed in the calendar year the tax credit is active
  • You must own the property. Renters are not eligible. 
  • The system must be located in the US at a primary or secondary residence
  • You must be the owner of the system, having either paid with cash or through financing
  • The solar system has never been installed or used before
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ITC Tax Credit Resources for 2021

pdf icon for download solar info from SEIASEIA (Solar Energy Industry Association) ITC Factsheet for 2021

pdf icon for download solar info from SEIAHomeowner’s Guide to the Federal Tax Credit (US Department Of Energy)

IRS Information page, “About Form 5695, Residential Energy Credits”  -this page also has the most current revision of the required tax form (5695).

History of the Solar ITC Tax Credit

The US Government continues to renew the periodically expiringFederal ITC solar tax credit step down bar graph 2021 2022 2023 2024 credit enacted in The Energy Policy Act of 2005. The Act included dozens of provisions for renewable energy production including solar and wind tax credits for residential homes and businesses. The initial 30% reduction quoted in the act lasted through 2019. It has changed many times, the percentage decreasing steadily before the credit eventually was to expire.

 

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