Switching to solar is one of the best ways to reduce your energy bills, increase your home’s value, and contribute to a cleaner environment. But one of the biggest incentives to go solar is the Solar Investment Tax Credit (ITC) — a valuable federal program that can help make your solar installation significantly more affordable.
If you’re considering solar, it’s important to understand how this credit works and how to claim it. Let’s break it down step by step.
What Is the Investment Tax Credit?
The ITC is a federal tax credit that allows homeowners to deduct 30% of the cost of their solar installation from their federal tax liability. This incentive was created to encourage the adoption of clean energy and significantly reduces the out-of-pocket cost of going solar.
How Much Can You Claim?
The tax credit is currently set at 30% of your total solar installation cost, but it won’t last forever:
✅ 30% for systems installed through 2032
✅ 26% in 2033
✅ 22% in 2034
✅ Expires in 2035
The sooner you install solar, the bigger your tax savings will be.
Tax Credit vs. Tax Deduction: What’s the Difference?
Many people confuse tax credits with tax deductions, but they work very differently:
- A tax deduction reduces the amount of income taxed. For example, if you have a $5,000 deduction and your income is $60,000, your taxable income would drop to $55,000.
- A tax credit directly reduces the amount of taxes you owe. If you qualify for a $6,000 ITC credit and owe $6,500 in federal taxes, your tax bill is reduced to just $500!
Because the ITC is a dollar-for-dollar reduction, it provides greater financial benefits than a standard deduction. And if you don’t use the full credit in one year, you can roll it over to future years.
Who Qualifies for the ITC?
To be eligible for the solar tax credit, you must meet these criteria:
✅ You must install the system at a U.S. residence you own.
✅ The installation must take place between 2017 and 2034.
✅ The system must be new.
✅ You must own the system (either through a cash purchase or solar loan; leased systems do not qualify).
✅ You must claim the credit the same tax year the system was installed.
What Costs Are Covered?
The ITC applies to a wide range of costs associated with your solar installation, including:
- Solar panels
- Battery storage systems (if installed with solar)
- Inverters and mounting systems
- Labor costs (installation, electrical work, etc.)
- Permit fees and inspections
- Sales tax (where applicable)
This means the tax credit applies to the cost of the entire system, not just the cost of the panels.
How Do You Claim the Solar Tax Credit?
We wrote a whole guide for claiming the solar tax credit! Here’s the quick version of how it works:
1. Keep All Solar-Related Receipts and Documents
Save all invoices, receipts, and documentation related to your solar installation. Feel free to reach out to Uprise Solar if you need documentation.
2. Fill Out IRS Form 5695
You can calculate your tax credit amount with IRS Form 5695. Multiply the total eligible cost by 30%, and apply that amount to your federal tax return.
3. Transfer the Credit to Your IRS Form 1040
Once you’ve determined your tax credit amount, apply it to your tax return. This will reduce your tax liability for the year.
4. Carry Forward Any Unused Credit
If the credit is larger than the taxes you owe, the remaining balance can be carried forward to the following year. This ensures you don’t lose any of your savings. For example:
- If your total tax credit is $5,000 but you only owe $3,000 in taxes this year, you can apply the remaining $2,000 to next year’s taxes.
This makes the ITC a great benefit even for homeowners with low tax liability.
Can You Combine the ITC With Other Incentives?
Yes! You can claim the federal solar tax credit alongside other incentives, including:
- State tax credits
- Solar Renewable Energy Certificates (SRECs)
- Local rebates or utility incentives
- Net metering programs, which compensate homeowners for excess solar energy sent to the grid
These incentives can further reduce the cost of going solar and shorten your payback period.
Why Now Is the Best Time to Go Solar
The 30% tax credit won’t last forever. Homeowners who install solar sooner will receive the biggest financial benefit. Now is the best time to make the switch and start saving.
Go Solar With Uprise
At Uprise, our goal is to simplify the solar process. We help homeowners understand their financing options, maximize their incentives, and get the most value from their system.
If you’re considering solar, don’t wait until the tax credit starts decreasing. Contact Uprise today to get a customized solar quote and take advantage of the full 30% ITC while it lasts!