Federal Solar Tax Credit Explained: 30% ITC Guide

The Federal Solar Investment Tax Credit (ITC) gives you a dollar-for-dollar reduction in your federal income taxes equal to 30% of your solar system's total cost.

How It Works

If your solar system costs $21,000, your tax credit is $6,300. If you owe $8,000 in federal taxes, you'd only pay $1,700 after the credit.

What's covered:

• Solar panels and inverters
• Battery storage (if installed with solar)
• Installation labor and permitting
• Mounting hardware and wiring

What's not covered:

• Roof repairs (unless needed specifically for solar)
• Tree removal (unless necessary for panel access)

Do You Qualify?

You need sufficient tax liability to claim the full credit. If your credit exceeds your tax bill, you can roll the remaining credit forward to the next tax year.

The ITC is available through 2032 at 30%, then steps down to 26% in 2033 and 22% in 2034.

Stack With State Incentives

Many states offer additional rebates and credits that stack with the federal ITC:

• Arizona: 25% state tax credit (up to $1,000)
• New York: 25% state tax credit (up to $5,000)
• New Mexico: 10% state tax credit (up to $6,000)

Use our Solar Cost Calculator to see your net cost after all incentives.

How to Claim

1. Install your solar system
2. Get a completed form from your installer
3. File IRS Form 5695 with your tax return
4. Apply the credit to your tax liability

Always consult a tax professional for your specific situation. The ITC is the biggest reason solar makes financial sense for most homeowners — don't leave it on the table.