Solar Tax Incentives FAQ

The key federal incentive is the Residential Clean Energy Credit, commonly referred to as the solar ITC (Investment Tax Credit). It allows homeowners to deduct 30% of the total cost of a qualified solar energy system from their federal income taxes.

As of 2025, the Federal Solar Investment Tax Credit (ITC) remains at 30% of your eligible solar system costs. According to recent legislation, this rate is expected to expire December 31, 2025.

To be eligible, homeowners must:

• Own the solar energy system (not lease it or sign a PPA)
• Install it on a U.S.-based primary or secondary residence
• Use new equipment (first-time use only)
• Have enough federal tax liability to use the credit
• Place the system in service by Dec 31, 2025
  

You can claim the Residential Clean Energy Credit when filing your federal tax return by completing IRS Form 5695 by Dec 31, 2025. This form allows you to calculate eligible installation expenses and apply the credit to your tax bill.

No. The credit is uncapped for solar systems. Credit value = 30% of total eligible costs, including solar panels, inverters, wiring, labor, permits, and 3 kWh+ battery storage.

Eligible costs include:

• Solar panels
• Inverters
• Wiring and mounting equipment
• Labor and permitting costs
• Energy storage batteries (minimum 3 kWh capacity)

Ineligible costs usually include general home improvements like roof replacement, unless the materials serve a dual solar function.

Yes. As long as they are U.S.-based, not rented, and “placed in service” by December 31, 2025.

Absolutely. The ITC can be used alongside:

• State solar tax credits
• Rebates from utilities
• Sales/property tax exemptions
  

Note: If you receive a rebate that lowers your out-of-pocket cost, it may reduce the base amount used to calculate your federal tax credit.

Only if the roofing material acts as a solar energy collector. Standard shingles or structural roof costs typically don't qualify unless integral to the solar installation.

• State tax credits – Several states offer their own tax credits in addition to federal ones. These vary widely and are not affected by federal legislation.
• Rebates and grants – Utility providers and state agencies still provide upfront rebates or grants for solar installations.
• Net metering programs – Most states still allow homeowners to receive credit for excess solar power fed back into the grid.
• Property tax exemptions – Many jurisdictions exempt solar installations from increasing your property tax assessment.