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Unlike utility rebates, rebates from state governments generally do not reduce your federal tax credit. Note: A private letter ruling may not be relied on as precedent by other taxpayers.

When your utility, or other buyer, gives you cash or an incentive in exchange for renewable energy certificates or other environmental attributes of the electricity generated (either upfront or over time), the payment likely will be considered taxable income. If that is the case, the payment will increase your gross income, but it will not reduce the federal solar tax credit. Payment for Renewable Energy Certificates However, payments from a public utility to compensate for excess generated electricity not consumed by the taxpayer but delivered to the utility’s electrical grid (for example, net metering credits) are not subsidies for installing qualifying property and do not affect the taxpayer’s credit qualification or amounts. For example, if your solar PV system installed in 2022 cost $18,000, and your utility gave you a one-time rebate of $1,000 for installing the system, your tax credit would be calculated as follows:

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Under most circumstances, subsidies provided by your utility to you to install a solar PV system are excluded from income taxes through an exemption in federal law. When this is the case, the utility rebate for installing solar is subtracted from your system costs before you calculate your tax credit. Rebate from My Electric Utility to Install Solar How do other incentives I receive affect the federal tax credit?įor current information on incentives, including incentive-specific contact information, visit the Database of State Incentives for Renewables and Efficiency website. If the storage is installed in a subsequent tax year to when the solar energy system is installed it is still eligible, however, the energy storage devices are still subject to the installation date requirements).

Energy storage devices that have a capacity rating of 3 kilowatt-hours (kWh) or greater (for systems installed after December 31, 2022).

Balance-of-system equipment, including wiring, inverters, and mounting equipment.

Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees, inspection costs, and developer fees.

Solar PV panels or PV cells (including those used to power an attic fan, but not the fan itself).The credit can only be claimed on the “ original installation” of the solar equipment.

The solar PV system is new or being used for the first time.

Also, you would not qualify if you only purchase the electricity from a community solar project. However, this document, known as a private letter ruling or PLR, may not be relied on as precedent by other taxpayers. Notes: the IRS issued a statement (see link above) allowing a particular taxpayer to claim a tax credit for purchasing an interest in an off-site community solar project.

Or, you purchased an interest in an off-site community solar project, if the electricity generated is credited against, and does not exceed, your home’s electricity consumption.

You own the solar PV system (i.e., you purchased it with cash or through financing but you are neither leasing the system nor nor paying a solar company to purchase the electricity generated by the system).

The solar PV system is located at a residence of yours in the United States.

Your solar PV system was installed between January 1, 2017, and December 31, 2034.

You might be eligible for this tax credit if you meet the following criteria: Am I eligible to claim the federal solar tax credit? There is no maximum amount that can be claimed.

The tax credit expires starting in 2035 unless Congress renews it. In August 2022, Congress passed an extension of the ITC, raising it to 30% for the installation of which was between 2022-2032. (Systems installed on or before Decemwere also eligible for a 30% tax credit.) It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034. Solar PV systems installed in 20 are eligible for a 26% tax credit. The installation of the system must be complete during the tax year. The federal residential solar energy credit is a tax credit that can be claimed on federal income taxes for a percentage of the cost of a solar PV system paid for by the taxpayer. (Other types of renewable energy are also eligible for similar credits but are beyond the scope of this guidance.) For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000. The federal tax credit is sometimes referred to as an Investment Tax Credit, or ITC, though is different from the ITC offered to businesses that own solar systems. A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe.