Updated 24 March 2026
Solar Tax Credit 2026: The 30% Federal ITC Explained
The Investment Tax Credit (ITC) saves you 30% on solar installation. Here is exactly how it works, what qualifies, and how to claim it.
Tax Credit Rate by Year
| Year | Credit Rate | On a $20,000 System |
|---|---|---|
| 2022-2032 | 30% | $6,000 |
| 2033 | 26% | $5,200 |
| 2034 | 22% | $4,400 |
| 2035+ | 0% (residential) | $0 |
What Qualifies for the 30% Credit
- • Solar panels and inverters (the main system)
- • Battery storage (3 kWh minimum, even without solar)
- • Installation labour (including electrical work and mounting)
- • Roof work directly related to the solar install
- • Permitting and inspection fees
- • Sales tax on all of the above
What Does NOT Qualify
- • Roof replacement not directly related to solar (replacing your roof first, then installing solar)
- • Tree removal for better sun exposure
- • Leased solar systems (the leasing company claims the credit, not you)
- • Generators (gas, diesel)
How to Claim It
Step 1: Install solar and get your final invoice (keep all receipts).
Step 2: Complete IRS Form 5695 (Residential Energy Credits).
Step 3: Transfer the credit to Form 1040 (your main tax return).
Step 4: The credit reduces your federal tax bill dollar-for-dollar.
What if my tax bill is less than the credit?
You can carry the unused portion forward to the next tax year. For example, if your system costs $25,000 (credit = $7,500) but you only owe $5,000 in federal taxes, you use $5,000 this year and carry $2,500 to next year.
State Incentives Stack on Top
Many states offer additional incentives that combine with the federal credit:
| State | Additional Incentive | Total Savings (on $20k) |
|---|---|---|
| New York | 25% state credit (up to $5,000) | $11,000 (55%) |
| Massachusetts | SMART incentive + SREC sales | $9,000-$12,000 |
| South Carolina | 25% state credit | $11,000 (55%) |
| Arizona | Property tax exemption | $6,000 + ongoing savings |
| Texas | Property tax exemption only | $6,000 + ongoing savings |
Key takeaway: The 30% credit is guaranteed through 2032. There is no rush to install this year unless your state incentives are expiring. But do not wait past 2032 when the residential credit drops to zero.
Calculate your cost after tax credits
Our calculator automatically applies the 30% ITC and shows your net cost.
Use the Calculator →