Solar Tax Credits

Tax Credits and Incentives

The following are just some of the tax credits and incentives available to those who qualify.

Shifting to solar should be a simple process, and our team of experts makes sure it stays that way. Halo Solar will help show you the best way to make your new system affordable. There are dozens of federal tax credits and utility-funded incentives for new solar systems, depending on where you’re located when you install the system, what type of system you install, and other factors.

 

What is the federal solar tax credit?

The federal residential solar energy credit is a tax credit homeowners can claim on federal income taxes for a percentage of the cost of a solar power system. A solar system makes your home or business more valuable—and studies show that solar homes sell faster. But the Special Assessment for Solar Energy Systems ensures that your property taxes will not be affected. The federal Investment Tax Credit can let you claim up to 26% of your solar system cost on your federal taxes.

 

How does the federal solar tax credit work?

Put simply, 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. 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.

 

Am I eligible to claim the federal solar tax credit?

The following criteria determine eligibility for the federal solar power tax credit:

  • Your solar power system was installed between January 1, 2006, and December 31, 2023.

  • You own the solar energy system that was installed

  • The solar PV system is new or being used for the first time. You can only claim the credit on the system's original installation.

  • The solar energy system is located at your primary or secondary residence in the US and does not exceed your home’s electricity consumption.

 

What is the federal solar tax credit for 2022? Future of the Solar Tax Incentive 

The federal solar tax credit for 2022 remains the same as previous years, at 26%. However, the solar incentive is being phased out, which means the credit for 2023 will be slightly less, at 22%. What does this mean for you? It means the value of the solar tax incentive is steadily increasing. Unless and until Congress renews the credit, it will not be available to homeowners past 2023.

 

How do you claim the solar investment tax credit?

The solar tax incentive is claimed as part of your annual federal tax return. The Halo Solar team will be happy to walk you through the process.

 

A quick summary of the process:

  1. Download IRS Form 5695 as part of your tax return. 
  2. Calculate the credit on Part I of the form. On line 1, enter your overall project costs and complete the calculations on lines 6a and 6b. 
  3. If solar is your only renewable energy addition, and you don’t have a credit from the previous year, skip down to line 13.
  4. On line 14, calculate any tax liability limitations using the Residential Energy Efficient Property Credit Limit Worksheet. Then, move on to the calculations on lines 15 and 16.
  5. Enter the figure from line 15 on your Schedule 3 (Form 1040), line 5.