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2023 Update: What Is the Solar Investment Tax Credit and how can you use it?

2023 Update: What Is the Solar Investment Tax Credit and how can you use it?

10th Dec 2022

If you're looking for a way to save money on your home solar battery setup, the Solar Investment Tax Credit (ITC) may be exactly what you need. Here are FAQs about how you may be able to save 30%.

First things first. We have done our best to gather this information for you, but we are not tax professionals, and this is not tax advice. It's important to double check with your CPA or tax expert! After all, everyone’s financial situation is unique and only the experts can tell you if you're eligible for this credit.

What is the federal solar tax credit? (aka Solar Investment Tax Credit )

The ITC is a federal tax incentive that provides homeowners with a substantial incentive for investing in clean-energy solutions such as solar electric systems and solar batteries.

Through this program, homeowners may be eligible to receive up to a 30% tax credit based on their overall solar investment, making it one of the most powerful ways to save money when purchasing a home solar system.

Here are some FAQs for the basics of the Solar Investment Tax Credit and how it can help you reduce costs when setting up a new system.

How much can I save?

  • By getting a Solar system from us this year, you may be eligible for a 30% credit on your federal tax return when you file next year. So installing a $10,000 solar system would reduce your tax bill by $3,000 - definitely not a bad deal!

Why is a tax credit better than a tax deduction?

  • A tax credit is a dollar-for-dollar reduction in the actual amount of income tax you would otherwise owe. A deduction only reduces your taxable income and the tax rate that is used to calculate your tax.

How do you qualify for the credit?

  • To qualify for this credit, you need to purchase and install a solar system on your home or commercial property in the United States between 2022-2032.
  • As of 2022 stand-alone battery storage added at same percentages as solar. Battery capacity must be at least 3 kWh

What expenses are included to calculate the solar tax credit?

  • Solar PV panels
  • Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees
  • Balance-of-system equipment, including wiring, inverters, and mounting equipment
  • Energy storage devices that have a capacity rating of 3 kilowatt-hours (kWh) or greater.

You might want to read - Do Batteries Qualify for the Tax Credit?

Can I claim the credit on my vacation home or cabin?

  • Yes. Solar PV systems do not necessarily have to be installed on your primary residence for you to claim the tax credit.

What happens if you don't use all of your SITC tax credit in a given year?

  • You can carry over any unused amount of tax credit to the next tax year.
  • This is a nonrefundable tax credit, which means you will not get a tax refund for the tax credit that exceeds your tax liability.

More Resources:

Federal Solar Tax Credit Resources - https://www.energy.gov/eere/solar/articles/federal-solar-tax-credit-resources

Database of State Incentives for Renewables & Efficiency® - https://www.dsireusa.org/

Homeowner's Guide to Going Solar - https://www.energy.gov/eere/solar/homeowners-guide-going-solar

Solar Investment Tax Credit: What Changed? - https://www.energy.gov/eere/solar/articles/solar-investment-tax-credit-what-changed

The Inflation Reduction Act: Printable Summary - https://www.seia.org/inflation-reduction-act-printer-friendly