26% U.S. Solar Energy Tax Credit
You will be eligible to receive a full 26% of your entire installed cost in the form of a federal income tax credit. Established by an act of Congress in 2006, this credit has enabled hundreds of thousands of U.S. homeowners and businesses to make a solar investment in their energy future. This is not a “taxable”, or “earned income” reduction, it is a dollar-for-dollar reduction in the amount of federal income taxes that you may otherwise owe or have already paid, and will be refunded. This incentive has been extended through 2021 – 2022 is the final year for the full 26%. Starting in 2023 there will no longer be a tax credit for individuals, and the business tax credit will be fixed at 10%.
The tax credit filing procedure is relatively simple: There is no application — if you made a solar system investment on your home and have proof of its cost, you (or your tax professional) simply submits on that specific year’s tax form (IRS 5695 for individuals, IRS 3468 for business) your system cost and the resultant 26% tax credit amount. And, if for any reason you cannot benefit from your full tax credit amount in that first year, you have the benefit of a lifetime carryover provision. In other words, you will never lose your tax credit.
For complete information regarding this, and all other state and local incentives, please refer to the U.S. Department of Energy’s excellent comprehensive website: Database of State Incentives for Renewables & Efficiency (‘DSIRE’).