Q: What is the Solar Investment Tax Credit (ITC)? 

The Solar Investment Tax Credit (also known as the ITC, Federal Tax Credit, Solar Panel Tax Credit, or Renewable Energy Tax Credit) provides a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government. The ITC is currently equal to 30% of the amount of the solar investment.

Solar Tax Credits are available for personal property (the Residential Renewable Energy Tax Credit) and commercial property (the Business Energy Investment Tax Credit).

What is the Residential Renewable Energy Tax Credit?

Here, the taxpayer may claim a Residential Renewable Energy Tax Credit for qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner.

Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.

How much is the Residential Renewable Energy Tax Credit worth?

  • For Solar-electric property, A taxpayer may claim an investment tax credit of:
  • - 30% for systems placed in service by 12/31/2019
  • - 26% for systems placed in service after 12/31/2019 and before 01/01/2022
  • - 30% for systems placed in service after 12/31/2021 and before 01/01/2033
  • - 26% for systems placed in service after 12/31/2032 and before 01/01/2034
  • - 22% for systems placed in service after 12/31/2033 and before 01/01/2035
  • There is no maximum credit for systems placed in service after 2008. Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2034. The home served by the system does not have to be the taxpayer’s principal residence.
  • As long as you purchase and own your solar energy system, you're eligible for the solar panel tax credit. Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect.
  • Remember, if you sign a solar lease lease or Power Purchase Agreement (PPA), you are not the owner of the solar panel system, so you cannot receive the tax credit.
  • Note: Section 13302 of The Inflation Reduction Act of 2022 (H.R. 5376) extended the expiration date and modified the phase down of this tax credit. It also made stand-alone energy storage systems eligible for the credit, and biomass heaters ineligible for the credit. Biomass heaters are now eligible for the residential energy efficiency tax credit. The summary below reflects the credit after the enactment of H.R. 5376.
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How do I claim the Solar Tax Credit?

You claim the solar tax credit when you file your yearly federal tax return. Remember to let your accountant know you’ve gone solar in the past year and he or she will have the forms in their tax software.  If you file your own taxes, You will need to complete a Form 5695.  Instructions can be found at https://www.irs.gov/pub/irs-pdf/i5695.pdf.

Where can I get more information on the Solar Investment Tax Credit?

If you're looking for something to put you to sleep, you can read the all of the language of the official bill (Section 303, beginning on pg. 2005, details the specifics of the extension).  Enjoy!

How much can the Solar Investment Tax Credit save me?

Please click on Get an Estimate for details on how how the Residential Renewable Energy Tax Credit can help you go solar. 

Understanding Solar Tax Credits & How The Solar Loan Works

One of our lending partners, Sungage created this great infographic to help make it simpler and easier to understand solar tax credits and how the the Solar Loan works:

Understanding Solar Tax Credits

What is the Business Energy Investment Tax Credit?

The American Recovery and Reinvestment Act of 2009 allows taxpayers eligible for the federal renewable electricity production tax credit (PTC)** to take the federal business energy investment tax credit (ITC) or to receive a grant from the U.S. Treasury Department instead of taking the PTC for new installations. The new law also allows taxpayers eligible for the business ITC to receive a grant from the U.S. Treasury Department instead of taking the business ITC for new installations. The grant is only available to systems where construction begins prior to December 31, 2011.

The Treasury Department issued Notice 2009-52 in June 2009, giving limited guidance on how to take the federal business ITC instead of the federal renewable electricity production tax credit. The federal business energy investment tax credit available under 26 USC § 48 was expanded significantly by the Energy Improvement and Extension Act of 2008 (H.R. 1424), enacted in October 2008. This law extended the duration -- by eight years -- of the existing credits for solar energy, fuel cells and microturbines; increased the credit amount for fuel cells; established new credits for small wind-energy systems, geothermal heat pumps, and combined heat and power (CHP) systems; allowed utilities to use the credits; and allowed taxpayers to take the credit against the alternative minimum tax (AMT), subject to certain limitations.

The credit was further expanded by The American Recovery and Reinvestment Act of 2009, enacted in February 2009. The federal Business Energy Investment Tax Credit (ITC) has been amended a number of times, most recently in December 2015. The bullets below shows the value of the investment tax credit for each technology by year. The expiration date for solar technologies and wind is based on when construction begins. For all other technologies, the expiration date is based on when the system is placed in service (fully installed and being used for its intended purpose).

How much is the Business Energy Investment Tax Credit worth?

  • For Solar-electric property, A taxpayer may claim a credit of
  • - Projects under 1 MW (or larger projects that are commenced no more than 60 days after the Treasury Secretary develops labor guidelines) do not need to meet the new labor standards established by the Inflation Reduction to receive the full 30% tax credit. Such projects that begin construction after 2021 and before 2025 can receive the full tax credit of 30%. Note, projects that commence construction on or after January 1, 2025 can receive a tax credits under the new Clean Electricity Investment Tax Credit (48E) described below.
  • - Projects over 1 MW that begin construction 60 days after the Treasury Secretary releases labor guidelines (January 29, 2023) and no later than January 1, 2025 will receive a base tax credit of 6%. However, projects can qualify for the full 30% tax credit if they ensure that all laborers and mechanics involved in the construction of the project or the maintenance of the project for 5 years after project completion are paid wages at rates not less than prevailing wages. Projects must also ensure that a percentage of total labor hours are performed by qualified apprentices. The percent of hours increases over time to a maximum requirement of 15% in 2024 and thereafter. Note, projects that commence construction on or after January 1, 2025 can receive a tax credits under the new Clean Electricity Investment Tax Credit (48E) described below.
  • Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible. Passive solar systems and solar pool-heating systems are not eligible. The Consolidated Appropriations Act, signed in December 2015, extended the expiration date for PV and solar thermal technologies, and introduced a gradual step down in the credit value for these technologies.
  • Note: The Inflation Reduction Act of 2022 (H.R. 5376) made several significant changes to this tax credit, including expanding the eligible technologies, extending the expiration date, modifying the scheduled step-down in its value, providing for new bonus credits, and establishing new criteria to qualify for the full credit. It also phases out this tax credit under section 48 of the Internal Revenue Code and replaces it with a new technology-neutral tax credit under section 48E of the Internal Revenue Code. The summary below describes the current section 48 tax credit as modified by the Inflation Reduction Act, and below that, the new 48E tax credit. 

Primary Solar Service Areas In New Jersey

Monmouth CountyAberdeen | Allenhurst | Allentown | Asbury Park | Atlantic Highlands | Avon-by-the-Sea | Belford | Belmar | Bradley Beach | Brielle | Clarksburg | Cliffwood Beach | Colts Neck | Cream Ridge | Deal | East Freehold | Eatontown | Englishtown | Fair Haven | Farmingdale | Fort Monmouth | Freehold | Freewood Acres | Hazlet | Highlands | Holmdel | Hornerstown | Howell | Imlaystown | Keansburg | Keyport | Leonardo | Lincroft | Little Silver | Loch Arbour | Locust | Long Branch | Manalapan | Manasquan | Marlboro | Matawan | Middletown | Millhurst | Monmouth Beach | Navesink | Neptune | Neptune City | Oakhurst | Ocean Township | Oceanport | Port Monmouth | Red Bank | Robertsville | Roosevelt | Rumson | Sandy Hook | Sea Bright | Sea Girt | Shrewsbury | Smithburg | Southard | Spring Lake | Spring Lake Heights | Strathmore | Tinton Falls | Union Beach | Wall Township | Wanamassa | West Freehold | West Long Branch | Wickatunk

Ocean County – Barnegat Light | Barnegat Township | Bay Head | Bayville | Beach Haven | Beachwood | Berkeley Township | Brick Township | Dover Beaches | Eagleswood Township | Forked River | Harvey Cedars | Island Heights | Jackson Township | Lacey Township | Lanoka Harbor | Lakehurst | Lavallette | Little Egg Harbor Township | Long Beach Township | North Beach Haven | Manchester Township | Manahawkin | Mantoloking | Mystic Island | Ocean Gate | Ocean Township | Pine Beach | Plumsted Township | New Egypt | Point Pleasant | Point Pleasant Beach | Seaside Heights | Seaside Park | Ship Bottom | South Toms River | Stafford Township | Surf City | Toms River Township | Tuckerton | Waretown | Whiting

Middlesex County – Avenel | Barber | Brownville | Carteret | Chrome | Clearbrook Park | Colonia | Concordia | Cranbury | Crossmans | Dayton | Dunellen | East Brunswick | Edgebrook | Edison | Ernston | Fords | Gillespie | Heathcote | Helmetta | Highland Park | Iselin | Jamesburg | Kendall Park | Laurence Harbor | Lincoln Park | Madison Park | Melrose | Metuchen | Middlesex | Milltown | Monmouth Junction | Monroe Township | Morgan Heights | New Brunswick | Old Bridge | Perth Amboy | Piscataway | Plainsboro | Port Reading | Princeton Meadows | Raritan Gardens | Rossmoor | Sayre Woods | Sayreville | Sewaren | Society Hill | South Amboy | South Plainfield | South River | Spotswood | West Carteret | Westons Mills | Woodbridge Township

Somerset County – Belle Mead | Bernardsville | Blackwells Mills | Blawenburg | Bound Brook |Bradley Gardens | Branchburg | Clyde | East Millstone | Far Hills | Franklin Township | Finderne | Gladstone | Green Knoll | Griggstown | Harlingen | Hillsborough Kingston | Manville | Martinsville | Middlebush | Millstone | Mine Brook | North Plainfield | Peapack | Pleasant Plains | Raritan | Rocky Hill | Skillman | Somerset | Somerville | South Bound Brook | Ten Mile Run | Voorhees | Warren | Watchung | Weston | Zarephath

Mercer County – Ewing | Groveville | Hamilton Square | Hightstown | Hillcrest | Hopewell | Lawrenceville | Mercerville | Pennington | Princeton | Princeton Junction | Robbinsville | Trenton | Twin Rivers | West Windsor | White Horse | Yardville

Union County – Union | Elizabeth | Linden | Plainfield | Rahway | Summit | Westfield | Berkeley Heights | Clark | Cranford | | Fanwood | Garwood | Hillside | Kenilworth | Mountainside | New Providence | Roselle | Roselle Park | Scotch Plains | Springfield Township | Summit | Union Township | Winfield Township

Additional Service AreasBoonton | Burlington | Flemington | Hammonton | Passaic | Williamstown |