Homeowners can use the federal solar tax credit to deduct 30% of the following costs:
- Solar panel costs
- Solar equipment costs, including inverters, wiring, racking mount hardware and other necessary equipment
- Labor costs of installation, including inspection and permitting fees
- Storage batteries for solar energy
- Sales tax paid on solar cost (if you live in a state that has sales tax on solar systems)
Homeowners can download Solar ITC Credit Tax Form (5695) from the Internal Revenue Service website. After filling out the relevant information, homeowners can deduct 30% of solar installation costs.
State Solar Incentives
Chances are your state has at least one solar incentive for homeowners or business owners. Solar incentives are also available in Washington D.C. and U.S. territories — such as Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands and the Northern Mariana Islands.
Many states offer tax credits or rebates for solar expenses. These state tax credit programs only apply to state taxes and the amount varies among states that offer this incentive. Some states offer rebates for expenses associated with solar energy systems, but these may only be available for a limited time while funds are available.
Another form of state-level solar incentives includes Solar Renewable Energy Certificates (SRECs), which may also be called a Solar Renewable Energy Credit. After installation, homeowners can register their solar energy system with appropriate state authorities to track energy production. The state government will offer you SRECs based on the energy generated, at a predetermined rate. Homeowners can sell earned SRECs to their local utility company, but this income is typically taxable.
Your local city, county or utility company may offer incentives to go solar. This varies location to location, but if you’re going solar it is a good idea to see what’s available in your area. The best resources for this may be your city or county government’s website or contact your local utility company.