Solar Tax Credit
What is the residential clean energy credit?
Residential Clean Energy Credit
Internal Revenue Service (IRS),
The Residential Clean Energy Credit, also known as the solar tax credit, offers a tax credit for expenses related to new clean energy property:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (beginning in 2023)
This incentive is structured as an investment tax credit, and was recently extended to 2034 through the Inflation Reduction Act.
Solar Tax Credit 2024
The solar panel tax credit for 2024 is 30% of eligible costs (which includes everything related to your installation, including the cost of the solar panels).
How it works
To benefit from this credit, you’ll need to install an eligible solar energy system in your residence and claim the credit when filing your federal taxes. The process involves completing the relevant sections on your typical tax return forms and filing Form 5695.
The solar tax credit is 30% for residential solar (it does not cover commercial solar installations). The incentive will remain at 30% until 2032, then will decline before fading out completely in 2035:
| Solar system Installed | Credit amount |
|---|---|
| 2020 – 2021 | 26% |
| 2022 – 2032 | 30% |
| 2033 | 26% |
| 2034 | 22% |
| After 2034 | 0% |
The solar tax credit is especially powerful because it applies directly to your tax liability (rather than deduction, which is used to reduce your taxable income).
Example Savings
Consider our same homeowner investing $60,000 in a new solar energy system. With the solar tax credit, they would be eligible for an $18,000 reduction in their tax liability.
What if I my credit is greater than the taxes I owe?
If you’re solar credit is more than your current taxes, you can roll the remainder over and use them the next year. Source: IRS
Commercial Example – Recoup 95% of Investment
Additional Programs
- Grants to public institutions Department of Commerce
