Solar Investment Tax Credit (ITC)
The Solar Investment Tax Credit (ITC) has recently been increased to 30 percent for solar systems purchased and installed on residential and commercial properties from January 1, 2022 through December 31, 2032. For residential installations, the ITC is applied to the homeowner’s income taxes. The credit is available once the solar system is turned on and fully functional on the homeowner’s house. Take note that Solar Investment Tax Credit is NOT a rebate but a credit against monies owed to the Treasury (income taxes).
How does the Solar Investment Tax Credit Work?
A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government. The ITC is based on the total amount of the investment. This includes solar panels, batteries, all balance of system parts and labor for the same. Both the residential and commercial ITC are equal to 30% of the total cost invested in eligible property’s which have commenced construction after January 1, 2022. The ITC residential credit is currently scheduled to “sun set” to zero on December 31, 2032 while the commercial and utility credit will drop to a permanent 10% percent.
Commercial and utility projects which have commenced construction before December 31, 2021 may still qualify for 30%. All commercial, government and not for profit projects commenced after January 1, 2023 will. The Treasury and IRS are currently drafting guidance which will provide additional ITC’s to commercial, government and not for profit entities. These categories will increase ITC’s by 10% for each of the following: Prevailing wage for all workers, American Made Equipment, Community solar, Low Income Housing Projects, Opportunity Zone Construction. It is possible to receive up to and in some cases over 50% ITC’s for commercial projects through 2032.
Please contact Florida Solar One solar specialist for more details on what the level of ITC’s your project may qualify for on a case by case basis.
What types residential solar electric systems qualify for the 30% Federal Tax Credit?
- ANY complete solar power package, for home or business.
- Emergency battery backup system, regardless if powered by solar or not.
- Product purchases that expand your existing solar power system and include at least one solar panel.
- Solar System for RV and boat that has been accepted by the IRS as a residence (2nd home) tax purposes.
Some Facts Regarding Eligibility of the Federal Tax Credit:
- The home served by the system does not have to be the taxpayer’s principal residence. All residential properties are eligible.
- If the federal tax credit exceeds your tax liability, the excess amount may be carried forward to the succeeding taxable year.
- There is no ceiling on the tax credit and may be carried forward up to 15 years.
- Applies to equipment AND installation costs.
- For Residential Renewable Energy Systems, use IRS Tax Form 5695 to report your expenses. (It can be used for any residence, not just your primary one.) Learn more about residential tax credits.
- Commercial systems have similar guidelines as residential systems but use IRS Tax Form 3468.
- See other state, county, city and utility company rebates and incentives.
- Florida has NO rebates, credits, incentives, handouts or freebies.
* Every individual’s tax situation is different. Please consult a tax professional to make sure your situation is applicable.
Federal Tax Credits in effect through 2032
In July 2022, the Inflation Reduction Act extended the 30% credit for residential solar to the end of 2032. It then expires completely.
- 30% for systems placed in service after 1/01/2022
- Systems must be placed in service on or after January 1, 2022, and on or before December 31, 2032 to qualify.
- The home served by the system does not have to be the taxpayer’s principal residence.
- Commercial (including 2nd and investment homes) follow the same until 01/01/2032 where they remain at 10% in perpetuity