30% Solar Tax Credit

July 23, 2024•3 min read

The federal solar tax credit offers homeowners a significant financial incentive to invest in solar energy, providing a 30% tax credit on the cost of installing solar panels through 2032, as reported by the U.S. Department of Energy.

What is the 30% Federal Tax Credit?

The 30% Federal Tax Credit, officially known as the residential clean energy tax credit, is a dollar-for-dollar reduction in income tax owed for homeowners who invest in solar energy systems. This incentive allows taxpayers to deduct 30% of the total cost of their solar installation, including equipment and labor, from their federal taxes. For example, a $20,000 solar system would result in a $6,000 tax credit, significantly reducing the overall investment cost. The credit applies to systems installed between 2022 and 2032, with decreasing percentages in subsequent years before expiring in 2035, unless renewed by Congress.

Eligibility and Claiming Process

To claim the solar tax credit, homeowners must meet specific eligibility criteria and follow a straightforward process. Eligible expenses include the cost of solar panels, inverters, wiring, and labor for installation. The credit can be claimed by filing IRS Form 5695 with your annual tax return. Importantly, there is no income limit to qualify, and the credit can be carried forward to future tax years if it exceeds your tax liability. While the credit primarily applies to primary residences, it can also be claimed for solar installations on second homes. However, rental properties are not eligible for this residential credit, though they may qualify for business solar incentives.

Combining Federal and State Credits

Many states offer additional tax incentives for solar installations, which can be combined with the federal solar tax credit to further reduce costs. For example, New York provides a state tax credit covering 25% of system costs up to $5,000. When used together, these incentives can significantly lower the overall investment required for a solar energy system. However, it's important to note that while state tax credits generally don't reduce federal tax credits, they may impact your federal taxable income by reducing state income tax deductions. Homeowners should consult with a tax professional to fully understand how combining federal and state credits will affect their specific financial situation.

Why Choose RAW Solar?

As experts in solar energy solutions, we at Raw Solar are committed to guiding you through every step of your solar journey in rain, snow, and sunshine.

Our team of professionals will help you navigate the complexities of the 30% Federal Tax Credit Rebate, ensuring you maximize your savings and reap the full benefits of your investment. We pride ourselves on tailoring solar systems to meet your unique energy needs while optimizing the financial incentives available to you.

Personalized consultation to assess your energy requirements
We take care of paperwork & provide a breakdown of your instant tax credit rebate
Platinum-Quality solar equipment and expert installation
30 Year Warranty with ongoing support and maintenance included
First Solar Company to offset carbon emissions from production

SOURCES

https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics

https://www.irs.gov/credits-deductions/residential-clean-energy-credit

https://www.nerdwallet.com/article/taxes/solar-tax-credit

https://www.marketwatch.com/guides/solar/federal-solar-tax-credits/