When Do Federal Solar Tax Credits, Rebates & Incentives Expire?

Federal Solar Tax Credits Chart

Incentives, Rebates, and Tax Credits Help Make Solar Panels Affordable

One of the most common solar myths is that it's too expensive. In reality, with the cost of solar decreasing over recent years, it's now more affordable than ever before. There are many incentives available to homeowners and businesses that want to go solar. Incentives can be offered at the state, local or federal level. The best incentive available is a 30% federal solar tax credit which reduces your final installation costs by a large amount. This tax credit is scheduled to expire in 2021, so you should act now if you plan on going solar at some point in the future.

There are two primary federal incentives.

Investment Tax Credit (ITC): The ITC is a dollar-for-dollar reduction in federal income taxes that can be claimed on your tax return if you install a solar PV system. The credit is equal to 26 percent of the cost of the solar PV system, and it expires on December 31, 2021. This means that for every dollar spent on installing a solar PV system, you get $0.26 back from the government when you file your taxes. In other words, you get 26 cents off your tax bill for every dollar spent to install solar at your home or business.

Production Tax Credit (PTC): A homeowner’s production tax credit is called an investment tax credit (ITC). Property Tax Exemption: Some states have property tax exemptions for the value added by solar PV systems to your home or business property value (called “assessed value”). Please check with local and state governments to see whether this applies in your state.

Can you claim ITC and PTC?

Taxpayers cannot claim both the PTC and ITC for the same property. Special rules apply when a taxpayer that is eligible for the PTC may elect to claim the ITC instead. Taxpayers may also claim a nonrefundable credit for the purchase of certain residential energy-efficient properties. Jun 4, 2021

The solar investment tax credit is the best incentive for homeowners.

If you’re a homeowner and you want to go solar, the best incentive available is the investment tax credit (ITC). While there are many benefits of ITC, its most significant perk is that it offers a federal rebate of 30% on your solar purchase. It’s an immediate discount for what can be a major financial commitment, which is pretty rare in government programs.

The solar ITC applies to systems installed through 2022.

The solar ITC is a federal tax credit for homeowners who buy solar panels. In the most basic terms, it’s worth 26% of the cost of a solar system in 2020 and will be phased down throughout 2022 before being eliminated entirely in 2023.

The ITC makes buying solar cheaper than it would otherwise be because homeowners get to deduct 26% (or 30% if you claim your credit in 2019) from the cost of their federal taxes owed.

The solar ITC is worth up to 30% of the system cost.

The solar tax credit, also known as the investment tax credit (ITC), lets you deduct 30 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value.

The solar ITC only applies to homeowners who buy their panels outright or with cash. If you finance your system over time with a loan or lease, then you'll receive the benefit through a lower monthly payment instead of a tax break.

You can often combine the 30 percent federal incentive with additional incentives from your state or utility company for even bigger savings. For example, in California you can get up to $4 per watt back for installing rooftop solar panels on your home. 

A new program helps homeowners pay for the up-front cost of a system.

One of the most significant costs to solar energy is the up-front cost of the system. To help homeowners pay for that, a new program allows them to finance their system with a loan against their home equity. The program, called PACE (Property Assessed Clean Energy), is an extension of a program that began in 2008 in California and has since expanded to several states, including New York and Colorado.

Here’s how it works: As part of your property taxes, you pay off the loan over 20 years. Because PACE loans are attached to your property taxes, they do not require credit checks or proof of income from applicants. While this does mean that you’re responsible for repaying 100 percent of your solar system if you move before paying off the loan, some programs offer transfer options to new owners—and even if you don’t qualify for one yourself, having a pre-paid solar power system will likely be attractive when it comes time to sell your house.

The major benefit? Paying over 20 years means that each monthly payment is smaller than it would be on other types of financing options like personal loans or credit cards. And while PACE loans are currently only available in certain states, they may soon become nationwide as more cities begin implementing similar programs.

Homeowners must own their solar panels to receive the full ITC.

If you own your solar system, you can claim a 30% investment tax credit or ITC. This is based on the total cost of your solar panel installation and includes labor costs, permits, and other equipment (batteries, wiring, inverters). Just like with the tax credits for electric vehicles and hybrid cars, there’s no limit to what amount you can receive back as a tax credit.

If you lease your solar power system, the leasing company will receive the ITC instead. However, in some cases, they may pass it along to lessees in another way. For example, SolarCity offers rate reductions based on state incentives when someone leases their panels.

Solar incentives can save you money on your new system.

The federal solar Investment Tax Credit (ITC) gives homeowners a tax credit equal to 30% of the cost of installing solar. As a homeowner, you can claim this credit on your federal taxes, which lowers the total amount of money you owe for income taxes.

There are two primary federal incentives for having solar panels installed in your home:

The residential Renewable Energy Tax Credit offers a tax credit equal to 30% of the cost of installing solar. This credit is good through 2019 and applies only to your federal income taxes, but it's important because it is not limited in any way by how much income you make—unlike most other credits that apply to lower-income individuals specifically. The residential ITC is non-refundable, meaning that if you don't have enough income tax liability (you don't owe as much money in taxes), then the ITC won't help reduce what you owe; however, if you have enough tax liability, then the ITC will help reduce what you owe by up to 30%.

The residential energy efficient property tax credit allows homeowners who install qualifying energy-efficient improvements such as new windows or insulation to receive up to $500 in credits per year through 2021. However, unlike other types of alternative energy tax credits which may be claimed once per installation (e.g., when purchasing an electric vehicle), this one must be claimed every year that an improvement was made—and there's no cap on how many years this can occur over time (so long as they're within five consecutive years)