What is the Solar Federal Tax Credit?

Solar Tax Credit For Southwest Missouri Homeowners

Getting ready to outfit your rooftop with a solar system? You’re embarking on an exciting journey! You are about to take command of your energy bills, with the potential to secure your electricity rates for the upcoming 25 years. **However**, and there’s invariably a however, it necessitates an upfront investment to usher in this beam of hope into your life. To make things a bit sweeter, the government extends a substantial federal tax credit to those shifting towards solar power. Who benefits the most from this? Individuals looking forward to long-term financial savings and making a positive impact on the environment. But hold on, there’s more good news for you. Continue reading, as you might discover a crucial tip that could significantly benefit you.

What exactly is the federal tax credit for solar and how does it work?


Save 26% Immediately

The federal tax credit for solar energy lets you claim a tax credit that’s equal to 26% of the purchase price of your solar system. That’s almost like getting a 26% off coupon when you go solar. Which means you only have 70% of the total purchase price to pay. Unless you happen to be on Empire Electric and then you can save even more money.


Tax Credit Basics

How exactly does this tax credit work? Is it super complicated to claim? The good news, it’s one of the simpler items on your tax return. When it’s time to file your taxes, there’s a one page form that asks you to enter the total cost of your solar system. There’s a line below that where you multiply that by 26% and then that amount is your credit. We’re not talking about a tax deduction that lowers your overall taxable income. This is a dollar-for-dollar reduction in your federal taxes. For example, let’s say you owe $6,000 in federal taxes this year. You get a solar tax credit of $5,000. The tax credit then wipes out $5,000 of the $6,000 that you have to pay, leaving your federal tax bill at only $1,000!

One point of clarification on how the solar tax credit works is that it is a non-refundable credit. That means that you can never claim more in a single year than what you owe.

If your solar tax credit amount is for more than what you owe, then you can roll it over into subsequent tax years. To illustrate, let’s say you owed $6,000 in taxes this year and you got a $10,000 solar tax credit. The tax credit would completely wipe out your tax debt of $6,000 for this year. You would then carry over $4,000 of credit for next year. If you didn’t use it all up the following year, you could roll it over to the next one. The tax credit is simply a reduction in the amount of money that you would normally have to pay the federal government. It’s not a subsidy or a refund. The government is allowing you to keep more of your own money, instead of sending it to them.


Claiming the Credit

To claim the tax credit, you’ll use IRS Form 5695 (or let your tax professional do it). You’ll fill out the form and then use the credit claimed on the form to offset the amount of taxes calculated on the other pages of your tax return. You don’t have to turn any paperwork about your solar installation to the IRS when you file your return. It’s a good idea to hang onto your receipt to document your solar system purchase and how much you paid for it. This way, you can provide documentation in the event of an audit. Overall, the solar tax credit is a huge incentive that’s available to anyone that buys solar for their home. Currently, it’s on the books at 26% through 2020-2022. Then the credit will gradually step down to 22% for systems installed in 2023 or may eventually expire.

Have more questions about the credit? Ready to get your 26% savings?

Contact us and we’ll help get your questions answered!



  1. Danielle Adreher

    I’m extremely impressed with your writing skills as well as with
    the layout on your blog. Is this a paid theme or did you modify it yourself?

    Either way keep up the excellent quality writing, it is rare to see a great blog like this one these

Leave a Reply

Your email address will not be published. Required fields are marked *