Solar Tax Credit Information
What is the Federal Residential Solar Tax Credit?
The federal residential tax credit is sometimes referred to as an Investment Tax Credit, or ITC, though it is different from the ITC offered to businesses that own solar systems. The federal tax credit for solar is one of the most important policies supporting solar energy growth and allows homeowners to deduct a percentage of the cost of installing a solar system from their federal income taxes.
Originally enacted in 2006, the ITC has helped the solar industry grow by more than 200x, with an average annual growth of 33% in the past decade alone.* This solar tax credit has been set to expire multiple times, but, thanks to the work of solar advocates and industry groups, has received multiple extensions.
An unusual feature of the ITC is that there is no cap on the amount that can be claimed, as long as it equals no more than 30% of your total costs for the solar energy equipment, including installation.
That's a good thing.
The 2022 extension of the solar ITC for 10 years provides market certainty. It promises to keep the benefits of clean solar energy within reach for homeowners across the nation.
Do Solar Batteries Qualify for a Tax Credit?
The answer is yes. The IRS made clear in a private letter ruling in 2018, that homeowner's batteries attached to solar systems such as home backup batteries, could qualify for the residential tax credit.
If you, as the homeowner, own it yourself, and the battery is charged by your home solar panels, your battery system may be eligible for the federal solar tax credit.
Starting in 2023, you may be able to claim the 30% tax credit for stand-alone battery storage as well - meaning the battery doesn't have to be powered by renewable energy.
How Do I Qualify for the Federal Solar Tax Credit?
To qualify for the federal solar tax credit*, you must meet all of the following requirements, per the Department of Energy:
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You must own your home.
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Your federal tax liability must be sufficient to apply for the 30% tax credit.
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You must own your solar panels and, if applicable, energy storage system (battery). If you sign a solar lease or power purchase agreement (PPA), then a third-party owns the system, and you won't qualify for the ITC.
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