The two-year extension of the Solar Investment Tax Credit will retain the current 26% credit for solar projects that begin construction until the end of 2022. For projects launched in 2023, the ITC will fall to a 22% rate. In 2024, it will end for residential solar projects and drop to 10% for commercial installations.
There is still no maximum amount that can be claimed, so don't worry if your tax liability is lower than your solar rebate – the credit can rollover to the next year. For example, if your solar system costs $20,000, you are eligible for $5,200 (26% of the total gross cost) in tax credit. If your annual tax liability is $4,000, you won't pay any taxes in 2021 and will owe $1,200 less in 2022 ($2,800). If your tax liability is $6,000, you will get a full credit the same year and will owe just $800.
The Solar Investment Tax Credit is claimed when you file your yearly federal tax return. All you need to do is to complete a relevant IRS form
and add your energy credit information to Schedule 3 (Form 1040).