Colorado Solar Tax Credit

Solar systems are popular among Colorado residents: it’s a steady supply of clean energy and a significant reduction in electric bill. Use Colorado Solar Tax Credit to make the purchase of solar panels cheaper. Here’s an article on how to claim it.

What is the Solar Tax Credit?

The Solar Investment Tax Credit (ITC) in Colorado works like this: Businesses and homeowners can claim a tax credit equal to 30% of the cost of a solar panel system. This credit directly reduces the amount of income tax you owe; it's not a rebate.

The Solar Tax Credit in Colorado is available to anyone who installs solar panels before December 31, 2034. The credit decreases to 26% in 2033 and further drops to 22% at the beginning of 2034.

How does the Colorado Solar Tax Credit work?

Let's say a household installs a $20,000 solar panel system. They can subtract $6,000 from their income taxes, bringing the net cost of the PV system down to $14,000. Any remaining credit can be carried over to subsequent years, ensuring you can eventually receive the full 30% promised by this solar incentive.

To qualify for the ITC, you must own the solar energy system; leased systems don't qualify. The system must be installed in the United States and be new or used for the first time. If you want to claim the credit for a PV installation on your boat or RV, consider noting it as your second home.

How do I get a solar tax credit in Colorado?

Claim the Solar Tax Credit after the solar system is installed. Keep detailed records of expenses related to the installation, like invoices and receipts. You won't need to submit them, but it's good to have in case of an audit.

To claim the Solar Tax Credit as a homeowner, 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) and 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 Colorado Solar Tax Credit

The cost reduction from the Colorado Solar Tax Credit includes not just solar panels but also all equipment, shipping, and labor expenses. There's no cap to how much you can claim back.

Additionally, besides the federal solar tax credit, Colorado offers its own state-level incentives and rebates for solar installations, further cutting the upfront costs. Explore more in our guide on Colorado 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.

More articles from this author