Owners of new residential and commercial solar can deduct 30 percent of the cost of installing a solar energy system from your federal taxes thanks to the investment tax credit (ITC), also known as the federal solar tax credit. This tax credit applies to both residential and commercial systems, and there is no cap on its value. As a result, an average consumer saves nearly $9,000 on the cost of going solar.
More about the solar investment tax credit
The ITC was established by the Energy Policy Act of 2005. It was set to expire at the end of 2007, but due to its popularity and to support the transition to a renewable energy economy in the United States, Congress has extended its expiration date several times. Now, the solar investment tax credit is available to homeowners through 2021. However, 2019 will be the last year for a full 30% tax credit. Here’s how it works.
In previous years, owners of new solar energy systems could not claim the tax credit unless their system was operational. Now, recent legislation allows homeowners to claim it as soon as the construction of the system begins, as long as the solar panel system is operational by December 31, 2023.
How to claim the solar investment tax credit
You can claim the investment tax credit for solar when you file your yearly federal tax return. Let your accountant know you’ve installed solar in the past year, or if you file your own taxes, you complete IRS Form 5965 to validate your qualification for renewable energy credits and then add your renewable energy credit information to your typical form 1040