Federal Solar Tax Credit (ITC)
A U.S. federal income tax credit equal to 30% of total solar system cost, including installation — the most valuable solar incentive available to most homeowners.
The Investment Tax Credit (ITC) allows homeowners to deduct 30% of the total cost of a solar PV system — including equipment, labor, permits, and battery storage installed at the same time — directly from their federal income tax liability. It is a dollar-for-dollar reduction in taxes owed, not a deduction from taxable income.
The Inflation Reduction Act (2022) extended the 30% credit through 2032, then steps down to 26% in 2033 and 22% in 2034 before expiring for residential systems. The credit is non-refundable — you can only reduce your tax liability to zero in the year of installation. Any unused credit carries forward to subsequent tax years.
To qualify, the system must be installed on a U.S. residence you own (not rent), must be a new or first-time installation, and must use new (not used) equipment. Battery storage added simultaneously qualifies; batteries added later may also qualify under IRA rules. The credit applies to both owned and financed systems — but not leased systems, where the installer claims the credit instead.
Real-World Example
A $28,000 solar installation qualified for a $8,400 federal tax credit (30%); the homeowner who owed $12,000 in federal taxes applied the full credit in year one, bringing her tax bill to $3,600.