Navigate the Solar Federal Tax Credit for a Brighter, More Affordable Energy Future
The Quick Facts
- 30% of the total project can be claimed on your Federal Taxes
- This is a Credit, not a Refund
- Credit lowers your Tax Liability
- You have 5 years to use the full ammount
- Credit only applies to New Equipment, not used
- Solar System must be owned outright (Not leased)
! Important Note ! Commonwealth Solar is not a tax consulting company. We are presenting you our best understanding of the tax incentives and credits, however you MUST consult your tax advisor to understand how this will apply to your own financial situation.
The Affordable Care act of 2022 increased the Federal Tax Credit for Solar to 30% through 2032. In 2033, it will decline to 26%, 2024 will be 22% and 2035 the program will end. This credit covers the following:
- Solar Panel Costs
- Solar Equipment, inverters, wiring, etc.
- Labor Costs for solar related items
- Solar Energy Solutions such as batteries, with a minimum rating of 3 kWh
- Sales Tax paid on the above
At Commonwealth Solar, this means that 30% of the total price you are presented with can be claimed.
The tax credit applies to your tax liability. If use a simplified Form 1040, look at line 22. If this line is positive, you should have a tax liability to apply the credit against. If you have other tax credits (like an EV Credit), or you do not use a simplified Form 1040, than this is more complicated to answer. Either way, we suggest you ask you tax advisor to know for sure.
Remember, the tax credit can carry over from year to year, up to five years normally. So if you can not use the whole amount in one year, you can use it in the next years.
This is covered in the IRS 26 USC Section 25D and is explained in more simplified terms in the IRS publication FS-2022-40
It is claimed on your taxes in the year it was installed AND paid for on form 5695. https://www.irs.gov/forms-pubs/about-form-5695
Be Careful about Claims
- Reroofing your hour as part of the system does not count for the credit.
- Anything that is not part of the above is not available for Credit.
- Many companies claim this is the last year, it is not.
- Be careful about extras some companies might try to include.
