Chances are, if you’re a homeowner considering solar, you’re very aware of the fact that it could come with a 30% income tax credit. This generous solar tax credit is among several federal Residential Clean Energy Credits available through 2032, which ultimately allows homeowners who have installed solar panels to subtract 30% of total eligible costs from their federal taxes.
While this seems fairly clear-cut, it’s important that homeowners transitioning to solar fully understand this tax credit and other solar rebates to avoid a costly misunderstanding that might not be known until you sit down to have your taxes done.
Unfortunately, not everyone installing solar qualifies for the 30% tax credit. It only applies to those who buy solar panels—not those who lease—for a primary or secondary home located within the U.S. If you are buying solar, those who will benefit the most from the tax credit are those with above-average electric bills, who owe the IRS money during tax season, and who anticipate staying in their home well into the future. Each person’s situation is different. It is highly advisable to consult with an accountant to clarify what you can expect to receive as a tax credit after going solar.
How Does It Work?
If you install solar in your home anytime through December 31, 2032, you are entitled to a federal income tax credit equal to 30% of eligible expenses. There is no limit on the expenses, making this credit applicable if you spend $10,000 or $100,000 on residential solar. Taxpayers must take the credit in the year the solar installation is completed. After 2032, the tax credit reduces to 26%, then drops to 22% in 2034. By 2035, there is no longer a solar tax credit offered by the federal government.
What are Eligible Expenses?
Per the IRS, expenses eligible for the solar tax credit include:
- Solar photovoltaic (PV) panels
- PV cells to power attic fans
- Contractor labor for preparation, assembly, or original installation
- Permitting fees, inspection costs, and developer fees
- Equipment to run the solar system, such as wiring, inverters, and mounting equipment
- Storage batteries
- Sales taxes
Can I Also Receive State Rebates?
Some states offer rebates and credits on top of the federal tax credit. For example, Rhode Island has the RE Growth Program, which offers premium credits back from Rhode Island Energy. Likewise, in Massachusetts, the MA Smart Program offers credits for the clean energy generated by individual homeowners.
The federal tax incentive and state rebates are making solar exponentially cheaper for homeowners, reducing the average cost of solar installation. For many, this is a game-changer in terms of the feasibility of moving ahead with solar.
Considering solar? Use our Solar Savings Calculator to obtain a custom solar savings estimate for your home. We invite you to learn more about Smart Green Solar, our core values and our unique approach–which has led to us becoming a leading full-service provider in Rhode Island, Massachusetts, and Connecticut.