How Does the ITC Work for Solar?

Jessica PirroJanuary 13, 2020 3705 2

What is the Federal Solar Tax Credit?

When you get a solar power system, 26% of your total project costs (which include the equipment, permitting and solar panel installation) can be claimed as a credit on your federal tax return. If you spend $10,000 on your solar power system, you are going to owe $2,600 less in taxes the following year. The solar tax credit is set to expire in 2022.

How Does the Investment Tax Credit Work for Solar?

We will explain below how the investment tax credit work as a solar incentive, so everyone can understand how the investment tax credit works for solar panels.

What is the Investment Tax Credit for Solar?

When you get a solar panel installation the federal government is going to reward you with a tax credit that will help when investing in solar panels.

A tax credit is going to be a dollar-for-dollar reduction of the income tax that you owe. A $1 credit is going to equal $1 less that you are going to pay in taxes. Yes, it is going to be that simple.

Aa an example, we will say that you owe $5,000 in federal taxes this year. If you claim a $3,000 tax credit, that will pay off part of your liability. You would only be left to pay $2,000 back in taxes after the credit is applied.

It is going to be different than a refund because you have to owe taxes to claims this solar incentive. But since most people are going to owe taxes, most people are going to end up being eligible for this solar incentive.

How Much Money Will I Save With the Federal Tax Credit?

As of today, the Solar Investment Tax Credit (ITC) is worth 26% of the total cost of the solar power system. This is going to include the value of solar power equipment and solar installer fees for the solar panel installation.

If it is going to cost you $10,000 to buy and install your solar power system, you would be owed a $2,600 credit.

You will only be allowed to claim the solar tax credit if you own your solar power system. This is the reason that a lot of solar installers advise against leasing solar panels. If another company leases you the solar power system, they still are going to be the ones that own the solar panel installation equipment, therefore they are going to be the ones benefit from this solar incentive.

You are still going to get the benefits of cheap solar power. But you will miss out on the solar tax credit, which is going to be a huge blow to getting a positive ROI from your solar power system.

It is going to make more sense to finance instead. You’re still on the hook for a solar loan, but you retain rights to the solar incentives that are going to make solar panels a sound investment.

How Long Will the Federal Tax Credit Stay in Effect?

The federal investment tax credit is going to eventually expire. But first, the federal government is going to begin by trimming back on its 26% tax credit solar incentive.

The credit is going to step down in value over the next few years until it eventually disappears completely for residential solar panel installation customers in 2020. Below is what is forecast for the solar tax credit in the next few years.

- 2020: 26%.

- 2021: 22%.

-2022: 0% (10% for commercial solar panel installations).

The good news is that homeowners can claim the credit the same year that they complete the solar panel installation.

The solar tax credit is going to play a major part in the return on investment that you will see when you get a solar panel installation. Sure the solar investment tax credit isn’t going to be around forever, the good news is we are still going to have another year to capitalize on the full 26% credit.

How Will You Claim the Federal Tax Credit?

Alright, not that we are at the part that homeowners are going to want to know, how are you going to be able to claim the tax credit?

First things first, keep all of the receipts from the start of the solar panel installation process to the finish. The more that you spend on your solar panel installation, the larger your credit is going to be, so you are going to want to keep track of everything.

Here are some of the expenses that you will be able to claim:

- The solar power systems equipment.

- Freight shipping costs.

- Professional solar installer consulting fees.

- Electrician fees.

- Engineer fees.

- Tools that are bought or rented.

- Wiring, screws, bolts, nails, etc.

- Solar power equipment that is purchased or rented (scaffolding or a man-lift).

- Permitting fees.

- Permitting services costs.

The cost of solar is going to vary depending on the approach you are taking to your solar panel installation.

How to File Form 5695 With Your 1040 Individual Tax Return

After spending the money, you are going to need to prove it to the government (which is why you should keep all of the receipts) to claim the solar tax credit. To do so, you need IRS Form 5695 to claim the residential energy credit.

If you file your taxes, use the steps below to claim your Residential Renewable Energy Tax Credit.

- Gather all of your expenses receipts and put them in a safe place.

- Confirm you are eligible for the tax credit. (If you do own the solar power system and owe taxes, you will most likely be eligible. Check with a tax specialist if you’re not sure.)

- Complete IRS Form 5695 to add up your renewable energy credits.

- Add your renewable energy credit information to your typical form 1040.

Solar system price checker

Comments (2)

  • SCOTT WYCOFF • June 15, 2022 25 23

    Hi, did you know there are spells to win love back from an ex. I have done it. I love reading about relationships and how to make them work, how to better the relationship, and how to keep the spark alive, even how to talk to them a certain way to get them to think a different way about the situation and you. If you need advice or want to win your ex back, try DR EMU copy and message on the following ( Email: ) or ( WhatsApp: +2347012841542 ) It will change your mentality and get you what you want. Facebook page Https:// 104891335203341

  • Paulamills • October 9, 2020 136 25

    This is an unforgettable experience my score was about 450. I couldn’t get anything at all due to low fico. I had a few negatives, my profile was laden with hard inquiries. So I went online and found a credit company on a blog I contacted them on (310) 879 2541, and after further agreement I made with him, I made a decision that if he can help me, I will forever be in their debt, they assured me they will do everything possible to fix my credit. After 7 days I couldn’t believe my eyes, they deleted everything bad on my credit profile including my hard inquiries and increased my score to 790 and added two trade lines. They made me the happiest woman on earth. Please if you have a similar issues contact LANX CREDIT SOLUTION. Here is their mail LANXCREDITSOLUTION@GMAIL.COM. thanks.

Design Your Solar Home


12 3

Input your address to see if it is solar friendly and how much you can save with solar.

Great. Your address is perfect for solar. Solar incentive is still available. Select monthly utility cost and calculate the size of solar system you will need now.

Whoa ! Going solar is definitely a smart decision.

kw System size years Payback period Lifetime savings

No money down, 100% finance is available.

Take Advantage of the Solar ITC and Sign Up For a Solar Installation Here!

Do not show this information again.