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How Does the Solar Tax Credit Work?

Disclaimer: This blog post is an overview and discussion of the Federal Investment Tax Credit for residential solar photovoltaics (PV) and is not legal tax or financial advice. For formal tax and financial advice, please advise a certified professional.

The solar tax credit is a fantastic incentive to go solar. However, we understand there may be many questions since we’re talking about taxes here. We wrote this blog as a simple cheat sheet to gather quick details surrounding the solar tax credit.

How it works

A tax credit is not the same as a deduction or a rebate; a simple way to think of the tax credit is an IRS gift card! You apply the tax credit towards the taxes you owe during the year the installation occurred, and any leftover credit carries over.

Solar Photovoltaic (PV) systems installed between 2020-2021 are eligible for a 26% tax credit and a 30% tax credit for systems installed between 2022-2032.

Example: The current investment tax credit (ITC) is at 30%, so if your system costs $20,000, you receive a $6,000 Tax Credit. If you owe $4,000 in taxes, you will have $2,000 in usable credits for future years.

How do I receive the Solar Credit?

You must file IRS Form 5695 on your taxes to receive the credit.

For more information, refer to "Q&A on Tax Credits for Sections 25 c and 25D" on the IRS website.

What are the Requirements for the Solar Credit?

- Solar PV system installed between 2022-2032.

- Located at your primary residence or secondary residence.

- Qualifying properties include Houses, Condominiums, Mobile Homes, and Manufactured Homes

- You own or finance your system (not lease it).

Panels do not need to be on your roof; they only need to generate electricity at your residence. At Lasso, we provide a solution for customers who prefer the panels installed on their property that qualifies for the solar tax credit.

Does my State Offer Solar Incentives?

Most states have their own incentives and are stackable with the Federal Residential Solar Energy Tax Credit.

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