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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. 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: March 5, 2019

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

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

Dave

Do you have to use the solar credit to pay off the solar installation loan?

Kevin Mcsorley

Can you file for the federal tax credit witj more than one home if you live at both..

B. Clark

I installed an $80k solar panel system for my house in 2018. I am in the process of doing my taxes. My solar tax credit allowed per form 5695 is the lesser of the 30% or my total tax liability. 30% of the $80k is $24k but my tax liability is $20k so I can carry $4k over to next year. I can also take the child tax credit of $2k except that when using the value on line 14 of the 5695 to input to my 1040 form, it then caps my total tax credits at my $20k tax… Read more »

E. Lomboy

My client installed a solar power system which was finally placed in service in 2018. There is a disagreement about final payment (of up to $200,000) Can taxpayer claim an additional solar credit for additional amount paid in 2019?

Dan

My contract and installation are for 2019, can I file my 2018 taxes using the credit? Or even refile my 2017 taxes to use the credit?

Glen

I was sold solar on the “promise” of the 30% tax credit. We zeroed out before the credit meaning it will ne carried over to 2019. That said. In my loan terms, if I do not apply the 30% to my loan within the first 18 months, my monthly payment will increase exponentially. Being that this credit is a NON refundable credit, how can my lender/ solar provider, change the terms of my loan without taking my income and or tax laibility into consideration?

Linda

Should my deduction include state(OH) taxes paid on the solar panel purchase (I doubt it, but had to ask!)?

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