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Frequently Asked Questions about the 30% Federal Solar Tax Credit for 2019

The federal solar tax credit, also known as the Solar Investment Tax Credit, or ITC, is the single most successful and important solar incentive available in the United States. The ITC is a direct tax credit of 30% of the cost to install a solar system, awarded to the system owner in the year after installation.

But that’s not all there is to learn about the ITC. In fact, the first thing you should know is that solar installations completed after December 31st, 2019, won’t be eligible for the 30% tax credit (unless congress passes an extension). For 2020, the tax credit steps down to 26%. For 2021, it becomes 22%. On January 1st, 2022, homeowners will no longer be eligible for the solar investment tax credit.

There’s a lot more to learn, so let’s dive in!

How the solar tax credit works

The ITC is a non-refundable tax credit, meaning you can’t take it unless you owe at least as much in taxes as the credit would be. For example, the average-sized home solar installation can make about 6.7 kilowatts of power under full sun, and costs about $22,000 (about $3.30 per watt) before state solar incentives.

For that average system, the solar tax credit would be $6,600 (30% of $22k).

In order to take the full tax credit in the year after installation, you’d need to have a federal tax bill of at least $6,600. If you don’t owe that much in taxes, you can still take the full credit, but you’ll need to space it out over more than 1 year.

Note: when we say “federal tax bill” it doesn’t mean “what you owe on April 15th.” Instead, it means “total tax liability,” so if you pay in all year through pay check deductions, that money counts as taxes paid. If that amounts to $6,600, you can claim the whole credit.

And you don’t have to be rich to claim the solar tax credit. If you take the standard deduction and no other tax credits, you can probably claim the full solar ITC as a single person making over $60,500, or a married couple making over $82,175.

Ready to install solar?

If you’re thinking about going solar and you want to know how the solar tax credit can benefit you, get in touch with one of our solar experts today.

If you’ve already installed solar, here’s some guidance on how to claim the solar ITC.

If you’d like to know answers to important questions about the tax credit, read on!

Without further ado, here is our solar tax credit FAQ:

  • Q: What is the solar tax credit?
  • A: Officially called the “solar investment tax credit” or ITC, it’s a dollar-for-dollar reduction in the federal tax bill of any homeowner who pays for a solar installation.

First enacted in 2005 and renewed in 2008 and 2015, the ITC is offered by the U.S. federal government for homeowners and commercial solar businesses to make solar more affordable.

  • Q: How much do I get back from the solar tax credit?
  • A: 30% of your costs to install solar, if you install before the end of 2019.

If you’re a homeowner who buys a solar panel system, you’re entitled to a tax credit of up to 30% of the total cost of that system. You can wipe out your entire tax bill if your credit is high enough, and you can take the credit over multiple years if you don’t owe that much in year 1. For example, if you spend $20,000 on a solar system, your 30% tax credit would be $6,000. But if you only owe $4,600 in taxes for 2017, your tax bill will be reduced to zero, and you’ll receive an additional $1,400 tax credit on your 2018 return.

  • Q: Will the solar tax credit expire after 2019?
  • A: Nope! The residential solar tax credit will continue at 30% through the end of 2019, then “step down” to zero after 2022.

Here’s what that looks like:

Stepping down the solar tax credit

That permanent 10% credit after 2022 will be given to companies who install and maintain solar systems and sell the power to another entity (homeowner, business, utility company, etc.) Of course, this assumes the Trump administration doesn’t decide to do away with the tax credit…

Claiming the credit is actually really easy, and like we mentioned above, it can wipe out your entire tax bill. Wow!

  • Q: Why are we subsidizing solar anyway? Shouldn’t the industry stand on its own two feet?
  • A: Lots of businesses get subsidies from the government, and solar is one of the most important future planning technologies there is!

We subsidize solar because it’s a key part of our nation’s plan to get off fossil fuels and help make a more reliable, sustainable energy future. But the ITC does more than that; the taxpayer investment in solar creates jobs, reduces prices for solar for everyone, and ensures this still-new industry grows large enough to sustain itself for long into the future.

Check out this handy graphic from the Solar Energy Industries Association (SEIA):

That’s a lot of benefit for our tax dollar investment, but it doesn’t even tell the whole story. A study conducted a few years ago by the U.S. Partnership for Renewable Energy Finance found that a dollar invested in reducing the cost of solar today returns an annual rate of 10% over a 30-year term, if you account for tax revenue from jobs created and leases and Power-Purchase Agreements (PPAs). That’s a huge rate of return, even as solar also saves homeowners money by reducing their electricity bills over 25 or 30 years!

And here’s another graph to put things in perspective a bit. The world’s top 20 countries by economic power (aka the G20) spend almost 4 times the amount on oil subsidies as the entire world spends on subsidies for renewable energy. Check out this chart:

We hope you enjoyed reading our solar tax credit FAQ. Please feel free to pose additional questions in the comments section below, and we’ll incorporate the best ones in the body of this post.

Head on over to our post about how to claim the ITC:

Last modified: August 6, 2019

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Andy
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Andy

Does “placed into service” mean:
a.) after the authority-having-jurisdiction signs-off on the permit, or
b.) after the utility gives permission-to-operate?

I’m asking this question with regards to residential installs.

Mel-
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Mel-

Hi, my son-in-law wants to put in his own solar system. If he buys the parts for the system, can he apply for this tax credit on that purchase amount? Is there a stipulation that it has to be operational for the credit in 2019 just in case he doesn’t finish up before the end of the year?

David Van Horn
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David Van Horn

Hi, so if I elect not to take the tax credit as I am in a zero tax bracket and have been for the past 10 years, who gets it?

Maxwell
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Maxwell

I received tax refund every year because I paid maximum tax on every paycheck.
Will that 30% solar tax credit allow me to receive more refund beside my own income tax refund?
Thanks.

Cecilia Guerrero
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Cecilia Guerrero

my husband and I are retired we don’t owe any taxes we get a small refund. we financed the solar system how are we going to get our rebate

Tom
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Tom

I’m in the process of buying a home where the solar power system was installed in April 2019, and I expect to close and take ownership of the house in August 2019, with nearly the full solar loan transferring to me as new owner. Who can claim the tax credit? The seller who contracted for the system and owned the home at time of installation? Me as the owner on Dec 31, 2019? The lienholder?

Jeremy
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Jeremy

If I own a property that is in a trust and my daughter lives in it, and no rent is being paid, is she allowed to file for the tax credit?

Billy
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Thanks for sharing all of this helpful info about the tax credit! Looking forward to learning more.

debby
Guest

can you file for a tax credit on a second home that you only use for personal use

Bella Weller
Guest

Yes, you may providing you live in it 6 months out of the year.

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