Disclaimer: This page provides an overview of the federal investment tax credit for residential solar energy systems. It does not constitute professional tax advice or other professional financial guidance. And it should not be used as the only source of information when making purchasing decisions, investment decisions, tax decisions, or when executing other binding
Federal Solar Tax Credit
If you’re thinking of purchasing a solar energy system, you’ve probably heard of the federal solar tax credit.
Unlike a solar lease or power purchase agreement (PPA), the federal solar tax credit is available to you for purchasing a solar energy system for your home. The credit, which is applied to your federal income tax return debt, is equal to a percentage of the solar panel installation costs.
How Much Can The Solar Tax Credit Save Me?
How much the Solar Investment Tax Credit can save you depends on what year your solar energy system was installed and approved to operate. Owners receive a 30% credit for systems that were installed by December 31, 2019. In 2020, the tax credit was lowered to 26%. As of August 2022, the Federal Solar Tax Credit is 30% and will remain at this rate for the next 10
How is The Solar Tax Credit Calculated?
For example, if your solar system costs $25,000, you’ll save $7,500 in a dollar-for-dollar reduction on your income taxes from the Internal Revenue Service (IRS). The investment tax credit is not a tax rebate and is not a deduction. Therefore, the IRS will not
be sending you a check. While a rebate pays you back, a credit offsets the balance of tax due on your tax return. So, if you owe little to no federal taxes there is little to nothing to offset, and you won’t be able to take full advantage of the credit.
Solar as a Service and The Tax Credit
So, what if you don't have a federal tax liability and you're like most Americans, who receive a federal tax refund? The good news is, you can still go solar with no money out-of-pocket with a solar as a service plan, sometimes known as a "solar lease or Power Purchse Agreement,".
iPower Energy can readily help you with a solar as a service plan. With this option, however, as a homeowner you do not directly receive the federal tax credit. Instead, the savings is passed on to you in the form of smaller energy bills.
With a solar service plan, instead of owning your rooftop solar system, you buy the energy produced by your solar panels and receive the monthly financial benefit of locked-in lower electric bills.