Solar Tax Credit (Residential Energy Credit) – Form 5695

Installing solar panels earns you a federal tax credit. That means you’ll get a credit for your income taxes that has the potential actually to lower your tax liability or increase your refund.

You can qualify for the ITC as long as your solar system is new or being used for the first time between January 1, 2006 and December 31, 2023. Unless Congress renews the ITC, it expires in 2024.

Other requirements include:

  • You must own the system outright (not lease it)
  • The system must be located in the United States
  • The system must be located at your primary or secondary U.S. residence or for an off-site community solar project

How much is the credit?

The credit is a percentage of the total cost paid for the purchased solar panels.

26% – For property placed in service between January 1, 2021, and December 31, 2022

22% – For property placed in service between January 1, 2023, and December 31, 2023

If my tax bill is too small, do I lose the credit?

No, you don’t lose the credit.

You can carry forward the Solar Tax Credit if your tax bill is smaller than your tax credit! A carry forward is a provision in the tax law that allows taxpayers to apply some of their unused credits, deductions, or losses to a future tax year.

What do I need to give my tax preparer to claim the credit?

Your tax preparer needs copies of the receipts and a clear indication of the amount spent to claim the credit on the appropriate form.