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Read our guide to learn about how much you can save with the federal solar tax credit in 2024.
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Faith Wakefield is a writer based in North Carolina. She holds economics and English degrees from UNC Chapel Hill, and her work has been featured on EcoWatch, The World Economic Forum and Today’s Homeowner. In her free time, she loves to binge-watch personal finance videos on YouTube, collect books and spend time in nature.
Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.
Karsten Neumeister is an experienced energy professional with subject-matter expertise in energy policy and the solar and retail energy industries. He is currently the Communications Manager for the Retail Energy Advancement League and has prior experience writing and editing content for EcoWatch. Before EcoWatch, Karsten worked for Solar Alternatives, curating content, advocating for local renewable energy policy and assisting the solar engineering and installation teams. Throughout his career, his work has been featured on various outlets including NPR, SEIA, Bankrate, PV Mag and the World Economic Forum.
The federal solar tax credit, or solar investment tax credit (ITC), currently allows you to claim 30% of the total cost of your solar system on your annual income tax return to reduce the taxes you owe.
Since the passing of the Energy Policy Act of 2005, the federal government has incentivized homeowners to switch to solar energy with the solar investment tax credit (ITC), also known as the federal solar tax credit. The rate of this credit has fluctuated over the years but currently sits at 30% of your total solar system costs. This guide covers how to qualify and file for the federal solar tax credit so you can get money back on your solar power system.
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The solar investment tax credit is a credit you can claim on your federal income taxes. The ITC is not a tax deduction or a tax refund. Instead, it reduces what you owe in taxes. The credit is currently valued at 30% of your total solar photovoltaic (PV) system cost.
The federal solar tax credit is available to any U.S. homeowner, condo owner or cooperative housing corporation member, as long as you own a solar panel system. You cannot claim the credit if you are leasing solar panels.
You can claim the credit for the tax year you turn on your system. For example, if the installation is completed in December 2024 but you can’t book an inspection and gain permission to operate (PTO) from your local utility until January 2025, you can only claim the credit for 2025.
You can only claim the federal solar tax credit once. If the taxes you owe are less than the value of the credit, you can roll over the remainder towards future income tax burdens.
For example, if you install a solar energy system worth $19,000, you’ll owe 30% ($5,700) less on your federal tax return. If your tax liability is less than $5,700, the remainder of the credit will be applied to your federal income tax liability the following year — you won’t be refunded the remaining credit amount in cash.
As outlined by the Inflation Reduction Act of 2022, the ITC will decrease to 26% in 2033 and drop to 22% in 2034. It will be canceled completely in 2035 unless Congress renews it.
You claim the solar tax incentive as part of your annual federal tax return with the Internal Revenue Service (IRS). Your solar provider can supply the proper documentation and instructions for applying for the credit. Most reputable installers typically provide this documentation along with the quote or contract you sign before installation so you know the value of the credit up front. We have listed the essential steps in claiming the credit below:
If you are filing for the first time, we recommend you consult a tax professional and your solar provider to ensure you correctly claim the ITC.
The Office of Energy Efficiency & Renewable Energy (EERE) states the following criteria to determine federal solar tax credit eligibility:
If your solar system installation is on a rental or vacation property that you own, you can only claim the ITC if you live at that property for at least part of the year. Even then, you can only claim the portion of the credit that reflects how much time you spent living there.
For instance, if the solar panel system on your rental property cost $20,000, then the full solar energy tax credit of 30% would be worth $6,000. However, if you live at that property 50% of the time (say six months out of the year), you’d only be eligible for $3,000, or 50% of the full credit value.
The year that you install your solar panels can affect how large of a tax credit you earn:
The following expenses are eligible for the federal solar tax credit, according to the EERE:
According to our 2023 survey of homeowners with solar, respondents paid an average of $15,000 to $20,000 for their solar panel systems. When you factor in the 30% federal solar tax credit, the average cost drops to $10,500 to $14,000. Local and statewide incentives can also further lower the cost of going solar.
That said, the total cost of your solar panel system will vary depending on your system size and provider. Although a larger system will cost more, your tax credit will also be higher.
Tax credits, net metering and tax exemptions are three of the most valuable solar incentives offered on a state or local basis. These incentives can be used in tandem with the 30% federal solar tax credit to increase your savings. You can use the Database of State Incentives for Renewables & Efficiency (DSIRE) to find rebates and state tax credits are available in your ZIP code.
Some states have a statewide tax credit that you can apply in addition to the federal solar tax credit. These states currently include Arizona, Colorado, Hawaii, Massachusetts, Maryland and New Mexico.
Policies for eligibility and claiming state credits vary, so make sure to look on your local government website and speak with your solar installer to learn more.
A total of 41 states currently require net metering. If you live in one of these states, you can export excess energy generated by your solar panels back to the utility grid for bill credits. Some states, like Idaho and Texas, do not have mandated statewide net metering, but many utility companies still offer a program.
Most states offer property tax exemptions for solar equipment, meaning you won’t have to pay taxes on the value added to your property when you install solar panels. Many states also offer sales tax exemptions for solar equipment. Your solar installer can help you fill out and submit any paperwork required for tax exemptions.
Garrett Nilsen, the deputy director of the U.S. Department of Energy’s Solar Energy Technologies Office, recommends the following when it comes to solar incentives:
“Incentives can vary across the country, so it’s important for homeowners to understand what they’re eligible for on the federal and local levels before going solar. An experienced local installer should be able to assist you in claiming any state and local incentives, as well as the ITC.”
Learn more about the solar incentives offered in your state and how to apply:
Alabama | Alaska | Arizona | Arkansas | California | Colorado | Connecticut | Delaware | Florida | Georgia | Hawaii | Idaho | Illinois | Indiana | Iowa | Kansas | Kentucky | Louisiana | Maine | Maryland | Massachusetts | Michigan | Minnesota | Mississippi | Missouri | Montana | Nebraska | Nevada | New Hampshire | New Jersey | New Mexico | New York | North Carolina | North Dakota | Ohio | Oklahoma | Oregon | Pennsylvania | Rhode Island | South Carolina | South Dakota | Tennessee | Texas | Utah | Vermont | Virginia | Washington | West Virginia | Wisconsin | Wyoming
If you live in a state that offers its own solar tax credit, you can redeem both the federal and state tax credits in full. For example, if your state offers a tax credit worth 10% of your solar system cost, you can still redeem the 30% federal tax credit.
Note that you will have to pay federal taxes on the value of your state tax credit.
Installing solar panels is worth it for most homeowners. A solar panel system typically generates clean energy for 25 years or more and saves the average U.S. household $1,346 on energy bills annually.
Although solar is still a significant investment, the cost has decreased by more than 50% over the last decade — and the 30% federal solar tax credit further reduces how much you’ll pay. Many utility companies and state governments also offer solar incentives, including tax credits, rebates and net metering. You can combine these incentives with the federal solar tax credit to maximize your savings.
However, if you live in a state with few solar incentives, you may save less over the lifetime of your panels. Other factors like the climate and your roof’s features can affect whether or not solar is worth it for you. Because every solar array and roof is unique, your solar installer will survey your home to determine if solar panels are suitable for you.
We recommend reaching out to a solar professional today to help you decide if solar is worth the investment.
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The 2024 federal solar tax credit, also known as the Residential Clean Energy Credit, is worth 30% of your total solar system cost for all installations in the U.S. completed through 2032.
There is no income limit for the federal solar tax credit. However, you need a large enough taxable income to claim the full credit. If you owe less in taxes than what your credit is worth, you can roll over the remaining credit to future tax years.
You can claim the federal tax credit once for the year you install a solar power system. However, if you install another solar system on a qualifying property, you can claim the tax credit again. Additionally, if your federal tax liability is less than the value of your credit, you can roll over the remaining value to apply toward future tax years.
No. You can only use the solar tax credit to reduce your federal tax liability. If you don’t owe federal taxes, you cannot redeem the tax credit in cash. However, you can apply any unused credit to your tax burden the following year.
Yes, you can combine the solar tax credit with other solar incentives offered by your state or local government and utility company.
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If you have questions about this page, please reach out to our editors at editors@marketwatchguides.com.
Faith Wakefield is a writer based in North Carolina. She holds economics and English degrees from UNC Chapel Hill, and her work has been featured on EcoWatch, The World Economic Forum and Today’s Homeowner. In her free time, she loves to binge-watch personal finance videos on YouTube, collect books and spend time in nature.
Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.
Karsten Neumeister is an experienced energy professional with subject-matter expertise in energy policy and the solar and retail energy industries. He is currently the Communications Manager for the Retail Energy Advancement League and has prior experience writing and editing content for EcoWatch. Before EcoWatch, Karsten worked for Solar Alternatives, curating content, advocating for local renewable energy policy and assisting the solar engineering and installation teams. Throughout his career, his work has been featured on various outlets including NPR, SEIA, Bankrate, PV Mag and the World Economic Forum.
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