California Solar Tax Credit

The greatest incentive available to solar owners is an Investment Tax Credit. Why? It lets you cut your expenses by a third! How do you get it? Here is a quick article on how to claim Solar Tax Credit in California.

What is the Solar Tax Credit?

The ITC, or the Solar Investment Tax Credit, allows businesses and homeowners to claim a tax credit equal to 30% of the cost of a solar panel system. The ITC is not a rebate which means that it directly reduces the amount of income tax you owe.

Solar Tax Credit is available for anyone who installs solar panels before December 31, 2034. It drops down to 26% in 2033 and to 22% in the beginning of 2034.

How does the California Solar Tax Credit work in practice?

If a household installs a solar panel system worth $20,000, they can subtract $6,000 from their income taxes, reducing the net cost of a PV system to $14,000.You can carry over the remaining credit to subsequent years. This way you're virtually guaranteed to get back the 30% that this solar incentive promises.

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To be eligible for the ITC, you must own a solar energy system — leased systems do not qualify. The solar energy system must be installed in the United States. The solar PV system must be new or used for the first time. If you want to claim the claim for a PV installation on your boat or an RV, write it down as your second home.

How do I get a solar tax credit in California?

Solar Tax Credit is claimed after a solar system is already installed. Keep detailed records of the expenses related to the installation of your solar energy system. This includes invoices, receipts, and other documentation that demonstrates the qualified expenditures, such as the cost of solar panels, inverters, mounting equipment, and labor costs. You will not need to submit them but you may require them in case of an audit.

To claim Solar Tax Credit as a homeowner, you have to complete IRS Form 5695 and attach it to your federal income tax return. Make sure to add your residential energy credit information to Schedule 3 (Form 1040). File your tax return by the applicable deadline.

Need help? Follow our guide!

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

Step-by-step guide

Benefits of the California Solar Tax Credit

The cost of a solar installation that California Solar Tax Credit reduces includes not only solar panels but all the equipment plus shipping and labor expenses. There is no cap to how much you can claim back.

In addition to the federal solar tax credit, California has its own state-level incentives and rebates for solar installations. These programs can further reduce the upfront costs of installing a solar energy system. Read more in our guide on California solar incentives.

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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