Did you know that the US federal solar credit scheme should have expired at the end of 2006? However, it was so successful that Congress extended it several times.
That includes the most recent bill passed by Congress in December 2020. With this, the tax credit for home solar photovoltaic (PV) systems is available up to 2023.
So, if you haven’t yet, now’s the best time to get your very own solar PV system.
We’ll cover the most critical facts you need to know about this federal tax credit, so be sure to read on.
What Is the Federal Solar Credit?
The federal solar credit is a credit you can claim on your federal income taxes. It also goes by the name solar investment tax credit (ITC).
The ITC is a dollar-for-dollar reduction applied to a portion of your solar PV system’s cost. So, the credit will reduce the federal income taxes you owe if you invest in qualified equipment.
How Much Is the Credit?
If you install a residential solar PV system on or before December 31, 2022, you can get a 26% federal tax credit. That then drops to 22% for home solar installation projects that commence in 2023.
The residential tax credit will then expire at the start of 2024.
How Do You Qualify for the Solar ITC?
The most crucial requirement is that you’re one of the 140+ million taxpayers in the US. After all, it’s a tax credit, so if you don’t pay federal taxes, you don’t have anything to deduct the credits from.
Another requirement is to install the solar PV system in your primary or secondary home in the US. That means you can also get tax credits for your vacation home, provided you don’t make any profit from it. If you do, you’d need to apply for a business tax credit on that solar-powered vacation property.
You must also be the owner of the system itself, from the solar panels down to the inverters and wires. For the same reason, leased equipment is often not eligible for the solar ITC.
Are There Other Solar Incentives Aside from the ITC?
Yes! Aside from the federal government, some state governments also offer tax credits.
A perfect example is New York, where residents can get a 25% state tax credit. That applies to the cost of new solar equipment. However, there’s a cap on the incentive, set at $5,000.
Some states also have net-metering policies and solar renewable energy certificates (SRECS). According to the Blue Raven Solar company, Ohio is an excellent example of where you can get both. Don’t worry, as either incentive won’t impact the federal solar tax credit you can get.
Net-metering lets you offset your utility costs if you generate surplus solar energy. On the other hand, SRECs allow you to monetize the surplus solar power your PV system produces. So, if you live in Ohio or another state where you can get both, hire a local installer who can help you apply for them.
Take Advantage of All These Solar Incentives
Now that you know what the federal solar credit is and how it works, it’s time to apply for it. Remember: you only have up until the end of 2022 to take advantage of the 26% ITC. That’s way better than the following year’s 22% credit, so, as early as now, start planning for your solar PV system.
Did you enjoy this informative article? If so, then feel free to check out our other home and lifestyle guides!
The Credit Rates Have Changed Since This Post Was Written
The rates in the original post are out of date. The Inflation Reduction Act, passed in August 2022, restored the credit to 30 percent. It set the rate at 30 percent for systems installed from 2022 through 2032. The rate was due to fall to 26 percent in 2033 and 22 percent in 2034.
The law changed again in 2025. The One Big Beautiful Bill Act, signed in July 2025, ended the residential clean energy credit for systems placed in service after December 31, 2025. In plain words, a home solar system must be installed and in service by the end of 2025 to claim the credit. This is a major change. Always check the current rules on the IRS website before you plan a purchase. Do not rely on the old rates in this post.
| Period | Credit rate |
|---|---|
| 2022 to 2032 (under the Inflation Reduction Act) | 30 percent |
| 2033 | 26 percent (as set by that law) |
| 2034 | 22 percent (as set by that law) |
| After December 31, 2025 (under the 2025 law) | Residential credit ended for new systems |
What Costs Can the Credit Cover?
When the credit was active, it covered the cost of solar panels, inverters, wiring, and mounting equipment. It also covered the cost of labour to install the system. Battery storage of at least 3 kilowatt-hours also qualified. Roof work needed for the system could qualify in some cases, but a full new roof usually did not. Leased panels did not qualify, because the credit only applied to systems owned by the homeowner.
Before the credit ended for homes, a solar system had to be at a home in the United States. A primary home or a second home could qualify, if the owner did not rent it out for profit. The home did not need to be the owner’s main home, but it had to be in the United States.
How Homeowners Claimed the Credit
A homeowner claimed the credit on their federal tax return with IRS Form 5695. The form asked for the cost of the system and worked out the credit. The credit cut the tax owed dollar-for-dollar. If the credit was larger than the tax owed in one year, the unused part could be carried forward to the next year. A tax credit is not a refund of cash. A homeowner with no federal tax bill could not use the credit in that year.
Keep the receipts and the installer’s papers. The IRS can ask for proof of the cost and the date the system was placed in service. A good record makes the claim easy.
State and Local Solar Help
States offer their own help. New York offers a state tax credit of 25 percent of the cost, up to a set limit. Many states offer net metering. Net metering lets a homeowner send extra solar power back to the grid and get a credit on their bill. Some states offer solar renewable energy certificates, known as SRECs. A homeowner earns SRECs for the clean power they make and can sell them. Each state has different rules, so check your state’s energy office before you buy.
Frequently Asked Questions
What is the federal solar tax credit?
It is a federal tax credit, known as the residential clean energy credit, that cut the tax owed by a share of the cost of a home solar system.
What is the current rate of the solar credit?
Under the Inflation Reduction Act, the rate was 30 percent for systems installed from 2022 through 2032. A 2025 law ended the residential credit for systems placed in service after December 31, 2025.
Is the residential solar credit still available?
Only for systems placed in service by December 31, 2025, under the 2025 law. Check the current IRS rules before you plan a purchase.
Can I claim the credit for leased solar panels?
No. The credit only applied to systems owned by the homeowner. Leased equipment did not qualify.
How did homeowners claim the solar credit?
They used IRS Form 5695 with their federal tax return. Unused credit could be carried forward to the next year.
Disclaimer: This guide is for general information only. It is not tax advice. Solar tax rules have changed several times, and the residential credit has ended for new systems. This guide gives no investment advice for readers. Speak to a licensed tax professional and check the current IRS rules before you make a decision.
Last Updated: 6 November 2026