The federal solar Investment Tax Credit (ITC) allows you to deduct 30% of your total solar installation cost from your federal income taxes. On a $20,000 system, that is $6,000 back. The 30% rate is available through 2032 thanks to the Inflation Reduction Act.
How the Federal ITC Works
The ITC is a dollar-for-dollar reduction in your federal income tax liability. It covers panels, inverters, batteries, wiring, labor, permits, and even some roof work if done as part of the solar installation. You must have sufficient tax liability to use the credit (or carry it forward to future years).
ITC Timeline
2022-2032: 30% credit. 2033: 26% credit. 2034: 22% credit. After 2034: The residential credit expires (commercial credit drops to 10%). Act before 2033 to get the full 30%.
State-Level Incentives
Many states offer additional incentives on top of the federal ITC: state tax credits (NY, SC, MA), SREC programs (NJ, MA, MD, PA, OH), property tax exemptions (most states), sales tax exemptions (many states), and utility rebate programs.
How to Claim the ITC
File IRS Form 5695 with your federal tax return. Your solar installer should provide documentation of total installed cost. The credit applies to the tax year when the system is placed in service (operational and connected to grid). Consult a tax professional for your specific situation.
Frequently Asked Questions
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