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Posted by Pat Raskob

2023 Solar Federal Income Tax Credit: Essentials to Know

2023 Solar Federal Income Tax Credit: Essentials to Know


The federal solar tax credit, also called the investment tax credit, allows users to apply up to 30% of the cost of their solar energy on their federal tax. This credit can be used for residential and commercial residence with no cap on its value. This rebate will be available for the next ten years and will drop to 26% after this period.

Once you have a working solar system, you qualify for the federal solar tax credit. One also has the opportunity to roll over any remaining credit to subsequent years if the tax liability is not enough.

One thing homeowners need to remember, however, is that once they sign a lease with an installer or power purchase installer, they cannot claim ownership of the solar system. Also, there is no income limit on the solar income tax bracket, so your income cannot disqualify you.


What Does The Federal Solar Tax Credit Cover?

Here are various expenditures that the federal Investment tax can cover if applied:

  • Solar panel cost

  • Labor costs involved in inspection, installation, developer, and permission.

  • Sales on qualified expenses

  • Energy storage program with a rating of 3 Kwh and above

  • All additional accessories for the solar-like wiring, inverters, and mounting. 

What to Know About Claiming the Solar Tax Credit

People who qualify for the solar income tax credit but do not owe the IRS any money for the current calendar year will not get any refund for the credit. In other words, the credit is non-refundable. 

The silver lining, however, is that one is allowed to carry the credit forward to the coming year, according to the DOE (Department of Energy). People with a tax liability for the coming year but not for the current year can still claim the credit.

Federal Tax Credit and Corresponding Incentives 

In addition to the  solar income tax credit, one can access several solar incentives like state-oriented solar programs, rebates, and other perks depending on location. Although some of these incentives might affect your federal income tax, one can combine others to reduce the cost of solar systems. 

To combine solar incentives with the federal ITC, here are a couple of things to know:

  • Utility Company Rebates: Any subsidy you get from your utility company will not count towards your income tax return because of the exemptions present in federal law. With this, whatever utility rebate you get when installing the solar system will be removed from the installation cost before you calculate the tax credit.

  • State Rebates: there will not be any reduction for your solar installation from these rebates

  • Tax Credit for States: Any tax credit you get from your state for your solar installation (like the state property tax credit) will not reduce your federal income tax credits. One thing you need to remember, however, is that if you get a state credit, you will have a higher tax on your federal returns since there are lesser income taxes.

  • Renewable Energy Certificate Payment: if you are paid anytime when you sell renewable energy certificates, Uncle Sam will count it as taxable income, increasing your tax income without reducing the tax credit. 

Claiming the Federal Solar Tax Credit 

You can claim the investment tax credit when filing the yearly federal tax return. Ensure you don't lose money and do the due diligence to get your solar tax credit. 



Pat Raskob
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