Learn How the Federal Solar Tax Credit Works

If you are considering purchasing a home solar system, make sure to consider the federal solar tax credit when making your decision.


Federal solar tax credits save thousands of dollars and boost your return on investment. In addition, having sustainable solar power has never been more accessible and affordable.

The tax credit applies directly to the total cost of the solar system, including solar panels, installation, and batteries to store energy.

What Is the Federal Solar Tax Credit?

You can get a federal tax credit by installing solar panels. In other words, you can get an income tax deduction that reduces your tax.


The federal government passed the ITC (Solar Investment Tax Credit) back in 2006. Since then, the US solar industry has grown by more than 10,000%, with an average annual growth rate of 50% over the last decade. Therefore, the industry has created thousands of jobs and capitalized billions of dollars in the economy.

As long as the system produces US household electricity, you can qualify for ITC for the fiscal year in which you installed the solar panels.

Timeline of Federal Solar Tax Credit 

The federal solar tax credit has many changes that remain to dissipate with time. The concept is that as solar panels become affordable and more efficient, tax credits will no longer be necessary. 

  • Changes to ITC 2016- 2019 

The tax credit refunded 30% of the cost of the commercial and residential system.

  • Changes to ITC 2020-2022

Commercial and residential units receive a 26% deduction from taxes on the cost of the system.

  • 2023 ITC amendment

Commercial and residential will receive a 22% deduction from taxes on the cost of the system.

  • 2024 ITC amendment

Residence tax incentives are no longer available. Instead, the employer can deduct 10% of the system cost from the tax.