Tax Day has never been so shiny: Federal Solar Tax Credit in 2023

The Solar Investment Tax Credit (ITC) was first introduced in the USA by the Energy Policy Act of 2005. To encourage Americans to use solar power, Congress proposed a solar panel tax credit worth 30% of the total solar installation cost (parts and labor), which basically meant a dollar-for-dollar reduction in the amount of income tax owed by the homeowner. For example, if the solar PV system cost cost $15,000, you could claim a $4,500 federal tax credit back then, which would reduce your federal income taxes due by $4,500 respectively. Easy!

Thanks to its popularity and significant contribution to renewable energy development, the ITC has been extended multiple times since it was enacted in 2006. The US solar industry has grown by more than 10,000% to reach 71.3 gigawatts of solar installed capacity (as of the end of 2019), creating nearly a quarter-million new jobs and investing billions of dollars in the economy of the country. Despite the tremendous success of the Federal Solar Tax Credit, its value started decreasing dramatically in 2019.

Solar PV system isn't only about buying solar panels. It comprises a range of auxiliary equipment and services, which will make you constantly dip into your pocket. All these expenses can be claimed, including:

• Solar equipment
  
• Freight shipping costs
  
• Solar consulting fees
  
• Professional installer fees
  
• Electrician fees
  
• Engineer fees
  
• Tools bought or rented
  
• Wiring, screws, bolts, nails, etc.
  
• Equipment purchased or rented (scaffolding or a man-lift, for example)
  
• Permitting fees
  
• Permitting service costs
  

As you can see, there are a lot of things to take into account. So, do keep all your receipts from the very beginning of your solar installation project. Like any tax incentive, the Federal Solar Tax Credit requires a paper trail. Don't worry, this paper work won't be in vain: the more solar-related expenses you can prove, the larger your credit will be.

Generally, the majority of solar system owners are eligible to claim the ITC. The key word here is owner: It is crucial that you own the solar PV system (i.e. you purchased it with cash or through financing but you are neither leasing nor are in an arrangement to purchase electricity produced by a system you do not own).

Here are some other facts regarding the Federal Tax Credit eligibility:

• The solar PV system must be located at your primary or secondary residence in the USA.
• You must have any tax liability.
• The solar PV system must be new or used for the first time. The credit can only be claimed on the 'original installation' of the solar equipment.
• Solar system for an RV or boat must be accepted by the IRS as a second home.

Remember, every individual's tax situation is different. Consult a tax professional to make sure you're eligible to claim the Federal Tax Credit.

Once you've installed your solar PV system, collected all the receipts and confirmed you're eligible, it's time to do some paperwork. There are just two forms to fill in:

Follow our guide on claiming Solar Tax Credit and start planning your best Tax Day ever. Because you deserve it.