Now is still a great time to take advantage of government incentives to go solar, like the federal solar tax credit. Although you might have heard news about the Trump Administration pushing to pause funding for the Inflation Reduction Act—which includes the 30% solar tax credit for both homeowners and businesses, you can still claim this incentive in 2025.

While it’s uncertain whether the credit will remain available long-term, the funding for this year has already been approved by Congress, making it difficult for the current administration to alter it. Additionally, Trump’s order is already facing legal challenges in several states, and there’s a good chance his executive actions will be overturned in court.

Currently, the federal government offers a 30% tax credit with no maximum limit on the amount you can claim. Our solar consultants can guide you through everything you need to know about qualifying for the federal solar tax credit, as well as exploring any state and local incentives available where you live.

Federal Solar Tax Credit: Everything You Need to Know

The federal solar tax credit, also known as the Investment Tax Credit (ITC), is a financial incentive that helps homeowners reduce the cost of installing solar panels. This credit allows you to claim a percentage of your solar system installation costs on your federal taxes.

How the Solar Tax Credit Works

When you install solar panels on your property, the IRS allows you to deduct a portion of the total cost from your taxes. For example, if you install a solar system in 2025, you can claim 30% of the installation cost. This can significantly reduce the upfront cost of switching to solar.

The current laws have established that the 30% solar tax credit will be available through 2033.

• 30% for property placed in service after December 31, 2021, and before January 1, 2033
• 26% for property placed in service after December 31, 2032, and before January 1, 2034
• 22% for property placed in service after December 31, 2033, and before January 1, 2035

Eligibility for the 30% Solar Tax Credit

To qualify for the credit, you must meet the following conditions:

1. You own your solar system (no leases or power purchase agreements).
2. The solar system is installed in the U.S.
3. The system is installed before the end of 2032 (since the credit is set to phase down after this date).

Additionally, your solar system must be new.

To take advantage of the tax credit, you must owe taxes, so make sure you have a tax bill in 2025 if you plan to use the credit for this year. If your tax bill isn’t large enough to claim the full credit at once, you can carry over the remaining balance each year until the ITC expires in 2034.

How Much Will You Save?

The amount you save depends on the cost of your solar system. For example, if your installation costs $20,000, you could claim a $6,000 credit (30% of the total cost). This will reduce your federal income taxes owed.

What the Solar Tax Credit Covers

• Solar panels and equipment like inverters, wiring, and mounting hardware
• Labor expenses
• Fees for permitting, inspections and design
• Energy storage and batteries rated 3 kilowatt-hours (kWh) or more
• Taxes associated with the solar installation process

Some expenses that are not covered by the solar tax credit include tree trimming or removal and costs associated with roof repairs and replacement. Also, The tax redit can apply to a secondary home, but only for the percentage of the tax year that you spend there. 

Benefits of the Solar Tax Credit

• Immediate Savings: The credit helps reduce the upfront cost of going solar.
• Long-Term Savings: Solar panels can lower your energy bills for decades.
• Environmental Impact: Going solar reduces your carbon footprint and reliance on fossil fuels.
• Energy Security: Add a battery to your solar installation in order to use solar power during an outage or to offset costs of time-of-use rate structures. Energy storage is also covered under the solar tax credit. 

A Brief History of the IRA

During the previous administration, the IRA (Inflation Reduction Act) set aside $891 billion dollars in part to help you pay for household improvements like installing heat pumps, buying an electric car and installing solar panels.

While many members of the current federal administration have vowed to kill programs that incentivize clean energy projects and delay climate action, we hope the IRA law will remain in place and continue to provide a 30% tax credit towards the purchase of solar panels and battery backup systems.

The law has bipartisan buy-in. The IRA has contributed over $220 billion in manufacturing investment alone since its inception. Much of that money has been concentrated in traditionally red states.

Planning Your Solar Installation

To take advantage of the tax credit, plan your solar installation carefully. Be sure to complete the project within the relevant timeframe and consult a tax professional to ensure you meet all requirements for claiming the credit.

*Disclaimer: This article is meant to offer a general overview of the federal solar tax credit for homeowners considering solar installation. It should not be taken as official financial advice. Homeowners looking to install solar products should exercise caution and consult with a licensed tax professional for personalized guidance.