How Do Solar and Federal Tax Credit Go Hand in Hand?


Solar power energy is now a mainstream source of electrical power, as evidence by the over 2 million systems that adorn homes and businesses across the US. Solar power attracts homeowners and business owners for a lot of reasons, many relating to the environment. It also attracts attention because of the federal solar power tax credit or ITC.

The government offered this tax credit in the hope that it would help spur interest in and installation of solar power systems. That’s a goal it has helped to achieve. If you’re considering a solar system for your home or business, you may wonder what the ITC can offer you.

Keep reading for a breakdown of what it is and how it works for you.

Investment Tax Credit

The ITC has a fairly straightforward structure. The federal government will let you write off a percentage of the cost of installation on your federal taxes. Between now and the end of 2022, the tax incentive rate for newly started projects is 26 percent.

An easier way to think of it is $260 per every $1000 spent on a solar panel system.

The credit rate will drop to 22 percent in 2023. The rate will drop to zero percent for homeowners starting in 2024, although commercial installation will still get a 10 percent incentive.

Although the government may extend the program again, interested homeowners shouldn’t bank on any ITC after 2023.


The solar power tax credit falls into an area known as non-refundable tax credits. That means you can only apply that tax credit against taxes you actually owe. You can’t claim it all at once and get a big tax refund.

You can carry the credit over from one year to the next to help reduce future taxes. You should talk with your accountant about how this will work in your situation.

The ITC applies to your final cost after you apply any rebates or incentives from state programs or your utility company.


All solar incentives and rebate programs typically require that you use a professional installer, such as Blue Raven, for your solar panel system. Professional installers can put the system in place safely, which is a big issue for a roof-installed system. Beyond that, utility companies require that a professional electrician handle connecting systems to the grid.

After installation, you can typically expect to see energy savings that show up in the form of smaller, sometimes much smaller, energy bills.

The Federal Tax Credit and You

The federal tax credit for solar power helps you offset the costs of solar installation by letting your write off a big chunk of the installation cost on your taxes. When paired with state or local rebates and incentives, that can mean getting a solar panel system for a lot less than than the average installation price would suggest.

The ITC isn’t a forever program. It’s likely those incentives will largely disappear after 2023. If you’re considering solar, sooner is better for federal tax purposes.

Looking for more tips on home improvement? Check out the posts in our Home Improvement section.


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