Alabama Solar Tax Credit

Alabama is a perfect place for going solar — lots of sunshine will make your investment worthwhile. To make your switch easier and cut your expenses by a third, make use of the Alabama Solar Tax Credit. Here is an article on how you do it.

What is the Solar Tax Credit?

The Investment Tax Credit or ITC or just Solar Tax Credit is a financial incentive provided by the American government to encourage people to use solar energy. It is like a discount on your income taxes and allows you to subtract a certain percentage of the cost of your solar panel system from the taxes you owe to the government.

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The idea behind this is to make solar energy more affordable for individuals and businesses, encouraging the use of renewable energy sources and helping to reduce dependence on traditional, non-renewable energy like fossil fuels. It's a way for the government to promote environmentally friendly practices and support the transition to cleaner energy options.

How does the solar tax credit work?

Alabama Solar Tax Credit 2023 is at 30%. This means that if your solar panel system costs $10,000, you could potentially get a $3,000 tax credit. You would only have to pay $7,000 in income taxes instead of $10,000. The cost of a solar system includes all the equipment that you need to build it, as well as shipping and labor. 

How do I get a solar tax credit in Alabama?

First, you have to install your solar system. Check if it’s eligible for ITC — you must own (not lease!) the system and it has to be new.

Complete IRS Form 5695 - Residential Energy Credits. This form will help you calculate the credit you're eligible for. You can find this form on the IRS website. Add your residential energy credit information to Schedule 3 (Form 1040).

Attach any required documentation to your tax return. This might include receipts, invoices, and other proof of expenses related to the purchase and installation of your solar panel system.

File your federal tax return. Include the completed Form 5695. The solar tax credit is a non-refundable credit, meaning it can reduce your tax liability to zero, but any excess credit doesn't result in a refund.

Need help? Follow our guide!

We cover filling out the forms for claiming ITC step by step

Step-by-step guide

Benefits of the Alabama Solar Tax Credit

The Energy Tax Credit in Alabama helps you reduce your expenses by a third. It also pairs nicely with all the state programs that Alabama might have. Check our article on Alabama Solar incentives to learn more.

Andrey Gorichenski

Senior Editor

Andrey had been a news editor and freelance writer for a number of medias before joining A1SolarStore team. Climate change and its impact on people's lives has always been among his interests and it partially explains his degree in Philosophy and Ethics.

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