---
description: The federal solar tax credit can be utilized on federal income taxes for a portion of the solar PV system expenses covered by the taxpayer.
title: What is the Federal Solar Tax Credit? - Energy Theory
image: https://energytheory.com/wp-content/uploads/2023/09/JAN23-What-is-the-Federal-Solar-Tax-Credit.jpg
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# What is the Federal Solar Tax Credit?

By [Elliot Clark](https://energytheory.com/author/elliot_clark/)November 17, 20233 Mins Read

![JAN23 What is the Federal Solar Tax Credit](https://energytheory.com/wp-content/uploads/2023/09/JAN23-What-is-the-Federal-Solar-Tax-Credit-1024x683.jpg "What is the Federal Solar Tax Credit?")

The federal solar tax credit (residential) is a tax credit that **can be utilized on federal income taxes for a portion of the solar PV system expenses covered by the taxpayer.** This credit is applicable to solar PV systems installed during the tax year.

For solar PV systems installed in 2020 and 2021, a 26% tax credit is available. In August 2022, Congress extended this [Investment Tax Credit (ITC)](https://energytheory.com/what-is-investment-tax-credit-itc/) to 30% for systems installed from 2022 to 2032 (Systems installed on or before December 31, 2019, were also eligible for a 30% tax credit). The ITC percentage will reduce to 26% for systems installed in 2033 and further decrease to 22% for systems installed in 2034. Unless Congress renews it, the tax credit will expire beginning in 2035.

There is no limit on the total amount that can be claimed.

### **Who is Eligible to Claim the Federal Solar Tax Credit?**

You might be eligible for this tax credit if you meet the following criteria:

1\. Your [solar PV system](https://energytheory.com/3-leading-types-of-solar-pv-system/) was **installed between January 1, 2017, and December 31, 2034.**

2\. The solar PV system is **located at a residence of yours** in the United States.

3\. You Either:

- You **own the solar PV system** (i.e., you purchased it with cash or through financing but you are neither leasing the system nor paying a solar company to purchase the electricity generated by the system).
- Or, you** purchased an interest in an off-site community solar project,** if the electricity generated is credited against, and does not exceed, your home’s electricity consumption.

**Notes:** The IRS issued a statement allowing a particular taxpayer to claim a tax credit for purchasing an interest in [an off-site community solar project](https://www.irs.gov/pub/irs-wd/201536017.pdf). However, this document, known as a private letter ruling or PLR, may not be relied on as a precedent by other taxpayers. Moreover, you would not qualify if you only purchased the electricity from a community solar project.

4\. The solar PV system is **new or being used for the first time.** The credit can only be claimed on the original installation of the solar equipment.

**Also See:** [What is Renewable Energy Investment Tax Credit (REITC)?](https://energytheory.com/what-is-renewable-energy-investment-tax-credit-reitc/)

### **Which Expenses are Considered for the Federal Solar Tax Credit?**

The following expenses are considered for the federal solar tax credit:

- **Solar PV panels** or PV cells (including those used for attic fan power, but excluding the fan itself).
- **Contractor labor costs** associated with on-site preparation, assembly, or the initial installation, which encompasses permitting fees, inspection charges, and developer fees.
- [Balance-of-system](https://energytheory.com/what-is-balance-of-system/) equipment, encompassing wiring, inverters, and mounting apparatus.
- Energy storage devices with a capacity rating of 3 kilowatt-hours (kWh) or more (for systems installed after December 31, 2022). Even if the storage is installed in a different tax year from the solar energy system, it remains eligible, but it must still adhere to the installation date requirements. Please note that a private letter ruling cannot be used as a precedent for other taxpayers.
- **Sales taxes** related to eligible expenses.

**Must Read:** [Can You Claim Solar Tax Credit Twice?](https://energytheory.com/can-you-claim-solar-tax-credit-twice/)

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[Elliot Clark](https://energytheory.com/author/elliot_clark/)

Elliot is a passionate environmentalist and blogger who has dedicated his life to spreading awareness about conservation, green energy, and renewable energy. With a background in environmental science, he has a deep understanding of the issues facing our planet and is committed to educating others on how they can make a difference.

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