Solar Tax Credit Eligibility

One of the main perks of investing in solar for the home are the federal tax credits customers receive. The solar tax credit decreases customers’ federal income tax, and derives from a percentage of the cost of a complete solar system installation. In 2022, the federal government passed the Inflation Reduction Act which increases the percentage of costs customers receive from 26% to 30%. Eligibility for the solar tax credit includes: 

• Installing and powering on a PV solar system during the tax year 
• Installing the system at a customer’s primary or secondary residence
• Owning the system from purchasing with cash or financing options 
• Claiming the one time tax credit on the original installation 

Solar Tax Credit Expenses

The federal tax credit includes multiple expenses that associate with a PV solar system. From labor to components, the expenses add up which gives customers the incentive to choose a company that provides components and installation services. A company that helps its customers from the consultation phase to the system activation phase will be able to assist with keeping track of expenses. The list of expenses includes

• Solar Modules (Panels) 
• Labor including site preparation, installation, permitting fees, inspection costs, and developer fees
• Energy conversion equipment such as wires, inverters, and mounting equipment
• Energy storage units that are paired with a PV solar system
• Sales taxes on expenses listed above

Accepted Circumstances

Sometimes, a customer will meet the requirements to receive the federal tax credit while having certain circumstances that differentiate them from the average customer. Each customer has their own needs when they choose to install a solar system. If a customer meets the requirements for the federal tax credit, they can receive the credit if: 

• The customer isn’t a homeowner, but a tenant-stockholder at a co-op housing corp or a condominium owner 
• Their vacation home is not a rental property 
• Their system isn’t connected to the grid, but generates electricity for the residence
• The solar panels are on the property but not the roof
• The residence has a home office, but the majority of power is used for residential purposes 
• The customer used financing rather than paying cash for the system 

Learn How To Claim

Once a customer receives the federal tax credit, they should understand how that tax credit can be used. For example, if a customer’s federal tax credit exceeds their tax liability, they won’t be able to get a refund. Although, any left over tax credit that hasn’t been used can be moved to the following year. Also, federal tax credit can be applied to the alternative minimum tax. 

Customers can claim the tax credit by filling out IRS Form 5696 and attaching it to their federal tax return. For more information homeowners should know about the solar federal tax credit, click here to read the official guide from the U.S Department of Energy.