Federal Tax Credit
Since 2009, the federal government offers a 30 % tax credit for solar equipment installed on residential properties. The credit is applied against your federal income tax liability, reducing the amount of tax you owe by 30 % of the system's cost, including installation. The credit is available through 2024; thereafter it phases down to 26 % in 2025, 22 % in 2026, and is eliminated after 2027 unless renewed by Congress.
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State and Local Incentives
States and municipalities provide a range of rebates, tax exemptions, and performance‑based incentives. Common programs include:
- Property tax exemptions that prevent increases in assessed value for solar systems.
- Sales tax exclusions on solar equipment.
- Utility rebates based on kilowatt‑hour production or system size.
- Net metering credits that compensate excess electricity sent back to the grid.
Eligibility varies: some states require the system to be certified by the state's energy office, while others apply a flat dollar amount per kilowatt.
How to Claim the Federal Credit
1. Install a qualified solar system—equipment must meet the Department of Energy's efficiency standards.
2. Complete IRS Form 5695, Residential Energy Credits, and attach it to your 2023 tax return.
3. Keep detailed records: purchase receipts, installation invoices, and a signed statement from the installer confirming system capacity.
Calculating the Benefit
For example, a 6 kW system costing $18,000 (including installation) qualifies for a $5,400 federal credit. Add state rebates of $2,000 and a net‑metering credit of $1,200, and the total savings could exceed $8,600 over the first year.
Key Points to Remember
The federal credit applies only to the tax year the system is installed, not the year the credit is claimed. State incentives may have separate deadlines and application processes. Always verify that your installer follows the latest EPA and ENERGY STAR guidelines to ensure eligibility.