Tax Credits + Incentives = Win. Win.

Solar Incentives

Homeowners Federal ITC 

The 30% federal investment tax credit (ITC) is among the most important incentives currently available for solar PV.

u

WHAT IS A TAX CREDIT?

A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000.

Z

WHAT EXPENSES ARE INCLUDED?

Solar PV panels or PV cells used to power an attic fan (but not the fan itself)

Contractor labor costs for onsite preparation, assembly, or original installation, including permitting fees,
inspection costs, and developer fees

Balance of system equipment, including wiring, inverters, and mounting equipment

Sales taxes on eligible expenses

U

CAN I CLAIM THE ITC, ASSUMING I MEET ALL REQUIREMENTS, IF…

…I AM NOT A HOMEOWNER?

Yes. You do not necessarily have to be a homeowner to claim the tax credit. A tenant-stockholder at cooperative housing corporation and members of condominiums are still eligible for the tax credit if they contribute to the costs of an eligible solar PV system.

In this case, the amount you spend contributing to the cost of the solar PV system would be the amount you would use to calculate your tax credit. However, you cannot claim a tax credit if you are a renter and your landlord installs a solar system since you must be an owner of the system to claim the tax credit.

…I INSTALLED SOLAR PV ON MY VACATION HOME (LOCATED IN THE U.S.)?

Yes. Solar PV systems do not necessarily have to be installed on your primary residence for you to claim the tax credit.

…THE SOLAR PV PANELS ARE ON MY PROPERTY, BUT NOT ON MY ROOF?

Yes. The solar PV panels located on your property do not necessarily have to be installed on your roof, as long as it is generating electricity for use at your residence.

$

WHAT IS THE SOLAR INVESTMENT TAX CREDIT?

The federal investment tax credit (ITC) is a tax credit that can be claimed on federal income taxes for 30% of the cost of a solar photovoltaic (PV) system.

The system must be placed in service during the tax year and generate electricity for a home located in the U.S.

There is no maximum amount that can be claimed if the solar PV system was installed in or after 2009.

A

AM I ELIGIBLE TO CLAIM THE INVESTMENT TAX CREDIT?

Your solar PV system was ‘placed in service’ between January 1, 2006, and December 31, 2021. Placed in service generally means that construction was completed, your utility approved connecting the system to the grid, preoperating tests determined the equipment works, and you gained ownership of the system.

The solar PV system is located at a residential location in the U.S. (but not necessarily your primary residence).

You own the solar PV system (e.g., you purchased it with cash or through financing – but are not leasing it or in an arrangement to purchase electricity generated by a system you do not own).

The solar PV system is new or being used for the first time. The ITC can only be claimed on the “original installation” of the solar equipment.

WHAT IF THE TAX CREDIT EXCEEDS MY TAX LIABILITY? WILL I GET A REFUND?

This is a nonrefundable tax credit, meaning you will not get a tax refund for the amount of the tax credit that exceeds your tax liability. However, you can carryover any unused amount of tax credit to the next tax year.

p

HOW DO I CLAIM THE ITC?

After seeking professional tax advice and ensuring you are eligible for the ITC, you can fill out and attach IRS Form 5695 to your federal tax return (Form 1040 or Form 1040NR).

State Tax Credits

Solar incentives vary among states and even among utility companies within the same state. In addition, rebate levels change frequently and are decreasing in many states. For the most comprehensive and up-to-date information about current state incentive level, see DSIRE (the Database of State Incentives for Renewable Energy).

q

WHAT ABOUT STATES THAT DO NOT OFFER SOLAR REBATES?

Even if your state doesn’t offer solar rebates, you may still be eligible for Solar Renewable Energy Credits (SRECs). Check out the SREC Marketplace here.

Solar Renewable Energy Certificates (SRECs) are a solar incentive that allows homeowners to sell certificates for energy to their utility. A homeowner earns one SREC for every 1000 kilowatt-hours (kWhs) produced by their solar panel system. An SREC can be worth over $300 in certain states.

SRECs exist as a result of a regulation known as the renewable portfolio standard (RPS). Renewable portfolio standards are state laws that require utilities to produce a specific percentage of their electricity from renewable resources. Nearly 30 states and Washington, D.C. have an RPS, and eight states have a renewable portfolio goal.

Commerical Federal ITC

The 30% federal investment tax credit (ITC) is among the most important incentives currently available for solar PV.

w

Overview

The solar investment tax credit (ITC) is a tax credit that can be claimed on federal corporate income taxes for 30% of the cost of a solar photovoltaic (PV) system that is placed in service during the tax year.

A solar PV system must be placed into service before December 31, 2021, to claim the 30% ITC.

For solar PV systems installed on or after October 4, 2008, there is no maximum amount that can be claimed through the ITC, and it may be used to offset either income taxes or alternative minimum taxes.

Typically, a solar PV system eligible for the ITC can also use an accelerated depreciation corporate deduction.

P

ELIGIBLE EXPENSES

The ITC is calculated by multiplying 30% by the “tax basis,” which is the amount invested in eligible property. Eligible property includes the following expenses related to a solar PV system;

Solar PV panels, solar curtain walls, and sales and use taxes on the equipment

Installation costs and racking

Step-up transformers, circuit breakers, and surge arrestors

Energy storage devices, 3 power conditioning equipment, and transfer equipment

w

ELIGIBLE PROJECTS

‘Placed in service’ between January 1, 2006, and December 31, 2021 (i.e., construction and installation is complete, the taxpayer gains legal title and control of the system, all required licenses and permits for operating the system is obtained, and pre-operational tests show that the equipment works

Used by someone subject to U.S. income taxes (i.e., cannot be used by a tax-exempt entity like a charity)

Located in the U.S. (but not U.S. territories unless owned by a U.S. corporation or citizen)

New and not previously used equipment

Not used to generate energy for heating a swimming pool

_

UNUSED TAX CREDITS

CARRYBACK AND CARRYFORWARD RULES
Unused tax credits related to the commercial ITC may be carried back 1 year and forward 20 years. After 20 years, one-half of any unused credit can be deducted, with the remaining amount expiring.

TAX-EXEMPT ENTITIES

If the solar PV system is used by a tax-exempt entity like a school, municipal utility, government agency, or charity, then the ITC may not be claimed.

In some states, a tax-exempt entity can indirectly benefit from federal tax benefits related to solar by entering into a thirdparty ownership (TPO) arrangement

Disclaimer: These factsheets provides an overview and does not constitute professional tax advice or other professional financial guidance. It should not be used as the only source of information when making purchasing decisions, investment decisions, or tax decisions, or when executing other binding agreements.