Texas Solar Tax Credit

Sunny Texas – is there a better place to install solar panels? If you think the same but are worried that installation will turn into an expensive undertaking, take advantage of the greatest incentive available to solar owners – Investment Tax Credit. Here is a quick article on how to claim Solar Tax Credit in Texas.

What is the Solar Tax Credit?

The Solar Investment Tax Credit (ITC) allows both businesses and homeowners to receive a tax credit amounting to 30% of their solar panel system’s cost. It’s important to note that the ITC directly reduces the income tax owed.

This tax credit is accessible to those who install solar panels before December 31, 2034, gradually decreasing to 26% in 2033 and further to 22% in early 2034.

How does the Texas Solar Tax Credit work in practice?

Here’s how the Texas Solar Tax Credit works in practical terms. If, for instance, a household invests in a $20,000 solar panel system, they can deduct $6,000 from their income taxes, ultimately lowering the net cost of the photovoltaic (PV) system to $14,000. Any remaining credit can be carried over to subsequent years, ensuring a virtual guarantee of reclaiming the promised 30% incentive.

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To qualify for the ITC, ownership of the solar energy system is a must, as leased systems do not meet the criteria. The installation should take place within the United States and involve a new or first-time-used solar PV system. If considering a PV installation on a boat or RV, categorize it as your second home to claim the credit.

How do I get a solar tax credit in Texas?

Claiming the Solar Tax Credit occurs post-installation. Keep comprehensive records of all expenses related to the solar energy system installation, including invoices, receipts, and other supporting documentation for qualified expenditures (e.g., solar panels, inverters, mounting equipment, and labor costs). Although not required during submission, these records may be necessary in the event 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. Ensure you include your residential energy credit information on 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 Texas Solar Tax Credit

The Texas Solar Tax Credit doesn’t just reduce the cost of solar panels—it encompasses all related equipment, shipping, and labor expenses. There’s no limit to the amount you can claim back.

Additionally, beyond the federal solar tax credit, Texas offers its own state-level incentives and rebates, further cutting the upfront costs of installing a solar energy system. Explore more in our guide on Texas solar incentives.

Julia Zaraeva

Author

Years of experience in translation and a love of nature help Julia find the right words to encourage going solar. She joined the team in 2023 and is happy to make her contribution to a greener future.

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