Save money by going solar ($0 installations may be available) - Click Here to Apply

Solar Power Rocks logo

Solar Power Rocks

Clear info on home solar power rebates, tax credits, and other benefits

Frequently Asked Questions about the 30% Federal Solar Tax Credit

In late 2015, congress renewed the popular solar tax credit as part of the end-of-year “omnibus spending bill.” At the time it was hailed as a landmark for the quickly expanding solar industry. The tax credit has helped thousands of homeowners go solar and save huge amounts on their power bill, but it’s now in jeopardy.

With the current head of the EPA against the tax credits, and the Trump administration looking to find ways to pay for its proposed tax cuts, people are worried that the solar tax credit might be on the chopping block.

It’s important for everyone to know how the tax credit can help them, and what they can expect if it goes away. If you’re thinknig about going solar and you want to know how the solar tax credit can benefit you, get in touch with one of our solar experts today.

We’ve prepared two posts to answer all your solar tax credit questions. Click on a button below to go to the relevant post:

Without further ado, here is our solar tax credit FAQ:

  • Q: What is the solar tax credit?
  • A: Officially called the “solar investment tax credit” or ITC, it’s a dollar-for-dollar reduction in the federal tax bill of any homeowner who pays for a solar installation.

First enacted in 2005 and renewed in 2008 and 2015, the ITC is offered by the U.S. federal government for homeowners and commercial solar businesses to make solar more affordable.

  • Q: How much do I get back from the solar tax credit?
  • A: 30% of your costs to install solar, if you install before the end of 2019.

If you’re a homeowner who buys a solar panel system, you’re entitled to a tax credit of up to 30% of the total cost of that system. You can wipe out your entire tax bill if your credit is high enough, and you can take the credit over multiple years if you don’t owe that much in year 1. For example, if you spend $20,000 on a solar system, your 30% tax credit would be $6,000. But if you only owe $4,600 in taxes for 2017, your tax bill will be reduced to zero, and you’ll receive an additional $1,400 tax credit on your 2018 return.

  • Q: Will the solar tax credit expire after 2019?
  • A: Nope! The residential solar tax credit will continue at 30% through the end of 2019, then “step down” to zero after 2022.

Here’s what that looks like:

That permanent 10% credit after 2022 will be given to companies who install and maintain solar systems and sell the power to another entity (homeowner, business, utility company, etc.) Of course, this assumes the Trump administration doesn’t decide to do away with the tax credit…

Claiming the credit is actually really easy, and like we mentioned above, it can wipe out your entire tax bill. Wow!

  • Q: Why are we subsidizing solar anyway? Shouldn’t the industry stand on its own two feet?
  • A: Lots of businesses get subsidies from the government, and solar is one of the most important future planning technologies there is!

We subsidize solar because it’s a key part of our nation’s plan to get off fossil fuels and help make a more reliable, sustainable energy future. But the ITC does more than that; the taxpayer investment in solar creates jobs, reduces prices for solar for everyone, and ensures this still-new industry grows large enough to sustain itself for long into the future.

Check out this handy graphic from the Solar Energy Industries Association (SEIA):

That’s a lot of benefit for our tax dollar investment, but it doesn’t even tell the whole story. A study conducted a few years ago by the U.S. Partnership for Renewable Energy Finance found that a dollar invested in reducing the cost of solar today returns an annual rate of 10% over a 30-year term, if you account for tax revenue from jobs created and leases and Power-Purchase Agreements (PPAs). That’s a huge rate of return, even as solar also saves homeowners money by reducing their electricity bills over 25 or 30 years!

And here’s another graph to put things in perspective a bit. The world’s top 20 countries by economic power (aka the G20) spend almost 4 times the amount on oil subsidies as the entire world spends on subsidies for renewable energy. Check out this chart:

We hope you enjoyed reading our solar tax credit FAQ. Please feel free to pose additional questions in the comments section below, and we’ll incorporate the best ones in the body of this post.

Head on over to our post about how to claim the ITC:

How much can you save with a solar roof?

Profit from your roof space: find local deals on solar, eliminate your power bill, and join the solar revolution.

See my savings!

40 thoughts on “Frequently Asked Questions about the 30% Federal Solar Tax Credit

  1. Russ says:

    My wife and i are both retired and as such, neither one of us has an “employment” tax that will ever become due. We are however, involved in the stock market and pay a capital gains tax. Are we able to apply the 30% credit towards the tax we owe due to capital gains? Thanks

    1. Ben Zientara says:

      Russ-

      Form 1040 has you report Capital Gain distributions on line 13, in the income section, which is carried down to line 22 as part of your total income. The credit from installing solar can directly reduce all taxes from line 22. So it looks like you’re good! Of course, talk to a tax professional before acting on this advice. And have a sunny day!

  2. Mark says:

    My partner and I are Joint Tenants in Common on our home and are considering buying rooftop solar. I have almost no tax liability to use the credit but her tax liability is significant. Can the deduction be taken in larger part (or in total) by the party with the greater liability?

  3. Anna says:

    I agree with P. Moon. Retirees living on social security or otherwise not paying much in federal taxes are being denied the option of installing solar panels. There’s a huge market out there if you include retired people. Solar companies AND retirees are losing out. Why not make the federal rebate available as a normal rebate on costs, not only a tax credit?

  4. Anonymous says:

    If I donate the solar equipment 2 years after purchase and taking credit ?

  5. Alexander Asante says:

    What if I buy a hybrid system with solar, wind and a diesel generator included? Do I qualify for a tax credit on the entire cost of the system or only on the cost of the solar panels

  6. Anonymous says:

    Is my tax credit from my solar purchase taxable income the fo

  7. Anonymous says:

    I received a tax credit from my 5695 form,hat money went directly to solar company tha

  8. Carla says:

    Hi, an arquitect already evalue my home and i will be buying solar panels in the next couple of months. Is the 30%tax credit issued as a check to you after the purchase once you file your tax return or its only a credit to your taxes? i work under an employer and pay more than enough taxes through the year. will i received a check (or probably a payment for two years) with the refund or just a tax credit (which i will not need)? . Thank you for your help

  9. Greg says:

    I had solar panels installed, they were purchased, the home is in a family trust, I was told that Trust would qualify for the 30 percent tax credit,is that true.

  10. Greg says:

    My roof only had a life of five years, I replaced it and put solar panels in, can I get the full tax credit on the new roof and solar instalation

  11. Ellen says:

    I have a stand alone PV system. This year we added a propane generator for back up. Are those costs deductible?

  12. Tyler says:

    Ok, so I just spoke (yesterday) to a company about installing solar panels on my house. This year I owe the IRS $1400 and I expect it to be about the same next year. They said with the system I’m installing I could get a credit of about $13,500. So let’s say I take out the $1500 or so I would owe the IRS next year that would leave about $12,000 in credits. Would I get that $12,000 back as a refund? I’m already claiming 9 dependents so I don’t think I can really lessen my tax burden much more than I already have.

    1. Ben Zientara says:

      Hi Tyler-

      Sadly, the ITC is not a fully-refundable tax credit, which means it can only offset taxes you actually owe. But you can take the credit for as many years as necessary to recoup the full amount. So if you expect to owe just $1,400 per year after all other deductions and your total ITC should be $13,500, you can expect to take 10 years to claim the full credit. Presumably some of those 9 dependents will age out of being dependents some time in the next 10 years, so your owed tax may go up and allow you to claim a larger portion of the credit.

      Hope that helps,
      Ben

  13. carol says:

    question do you know how it works for a married coup;e filing seaparetely

  14. Aida says:

    Considering getting panel. I usually never own taxes because I withhold money so I don’t owe with the 30% tX credit I know it’s a refund but I’m being told I would get tht money back since I already paid it through out the year in my With holdings. Is thAt correct ?

    1. Ben Zientara says:

      Yes, that is correct.

  15. James says:

    I recently got solar panels at the end of summer 2016, they were financed (about $30,000) with no payments due for the first year. So we have yet to actually pay anything toward them. Upon doing my taxes this year we were told that we couldn’t take the 30% tax break for that amount because they were finance and we havn’t actually paid for them. Is this true or are we able to go ahead and apply for the tax credit for the full amount finance.

  16. Ashley says:

    How is the year for the tax credit determined? By the date of final payment, the date of the installation, or the date of Permission to Operate (PTO)? Thanks!

    1. Ben Zientara says:

      Hi Ashley-

      We answer that question on another page about the tax credit (gee, maybe we should combine them?).

      Anyway, here’s the answer:

      The instructions for Form 5695 say “Costs are treated as being paid when the original installation of the item is completed,” so you can claim all the costs for your installation no matter when they were paid, but you have to wait to claim them in the year the installation takes place. Keep receipts!

      Hope that helps, thanks!

  17. W.Q.Henderson says:

    Early this coming year (2017) I intend to install a small solar system in order to electrify my 4-car garage which contains a large hobby work space. If the system works as expected, I intend to enlarge the system in order to electrify my 2000sq/ft residece. How doew the federal & state tax rebaate system deal with a two step instalation?

    1. Ben Zientara says:

      Hi, W.Q.

      You can claim the ITC for your first installation as long as that garage is on the same property as your primary residence. Then, when you’re ready, you can claim a second ITC credit if you add to the installation later. Any time you spend money on a renewable energy project for your home, the ITC applies. Talk to a tax professional to be sure, but that’s the gist of it.

  18. Jasper wilson says:

    I am in the #9 category I don’t file income taxes I want to no if someone can take the tax credit for me and give it to me to pay on solar panels

    1. Ben Zientara says:

      I wish it were possible, Jasper. Big companies like SolarCity do this all the time, trading their tax credit for installing solar to companies with hug tax burdens. Sadly, individuals cannot do that at all. Ain’t the tax code grand?

  19. Christian Munz says:

    I can’t find anywhere that states that I am not allowed to claim a new barn as the structure for my solar array and receive a 30% tax credit on the construction cost of said barn. I am pretty sure this is unallowable, but where can I find that documented on an official site? Or, is it allowable?

  20. Phillip Swan says:

    Norwich would this cost for my home

  21. Paul mooney says:

    If I install a TPO roof in conjunction with the installation of a solar system, can I take an additional 30 % ITC on the cost of the roof?

  22. Lessell says:

    Yes, I will save about 25-45 $ each month if I apply all my tax refund of $8,000 towards my balance of my solar being financed. I just couldn’t find the information anywhere on the internet or Solar websites stating that my solar refund could be applied towards my loan balance a year later.

    1. Ben Zientara says:

      That’s great, Lessell! Probably the reason they say “a year later” is they assume you’ll install solar the spring or summer of one year and then wait until April to get your tax credit. For the financial estimates we do, we calculate a “Year one” price, which is the purchase price minus rebates, energy savings, and the tax credit.

      Anyway, looks like you’ll be saving money even while paying down your loan, which basically means an infinite return on your investment. Good job!

  23. jackson says:

    I was informed by a solar company that I can apply my tax credit to pay down my loan for the solar system – is this true?

    1. Ben Zientara says:

      It is! Whatever you get as a tax credit this year, as long as it comes to you as a refund check, should be able to be applied to the principle of your loan. That won’t reduce your monthly payment unless you refinance, but it makes paying off the loan go much quicker, meaning you’re closer to breaking even and making those sweet solar bucks! Paying the loan off early also increases the rate of return on your investment in solar.

      Is your monthly loan payment more or less than the money you’ll be saving with solar?

  24. Sara says:

    Are you able to get the tax credit if you purchase the solar panels from Costco and install them yourself?

  25. Mel G says:

    Does the 30% tax credit apply to solar leases?

    1. Ben Zientara says:

      Hi, Mel! The solar tax credit does not apply to leases. Actually, the leasing company gets the tax credit, which is why leasing is so affordable.

      Thanks!
      -Ben

  26. Lynne says:

    Is there any way to either work out an agreement with an installer or another person to get the Federal Tax Credit if you you do not pay taxes because you are disabled? Is there any push at all to allow seniors, the disabled and others who do not pay Federal tax to get a rebate? After all, these are the people who would benefit the most in the savings and they don’t seem to be able to take advantage of the Federal Program. Does anyone care enough to advocate for this? There are many people who own homes that no longer have to pay these taxes since they are on Social Security. Who could I contact concerning this?

  27. J. Dudek says:

    Does the 30% Federal Solar Tax Credit apply to residential rental properties? I am considering putting solar on all of my rental properties but I am unclear on whether I would qualify for the credit because they are not my primary residence. My LLC owns them.

    1. Ben Zientara says:

      Hi there! Unfortunately, the solar tax credit does not apply to rental properties. It’s a sad situation, indeed, because great landlords like you could be a great source for capital for solar installations.

  28. V. Williams says:

    Can you take the 30% credit anytime within 5 years after the installation?

    1. Ben Zientara says:

      Nope, only for two years following installation.

  29. P. Moon says:

    Why are solar companies NOT required to tell customers the limitations of the solar tax credit? They aren’t telling retired people, that are no longer paying taxes that they won’t receive their ITC and low income people that they will receive a small portion of their ITC. They are also not being told they can only roll over remaining credits until the next tax year, so they will likely loose thousands. .

Have anything to add?

Your email address will not be published.