In August of 2022, the federal government renewed and extended the Solar Investment Tax Credit as part of the Inflation Reduction Act (IRA), raising the rate from 26% to 30% and ensuring that the credit will be in place at that level until the end of 2032.
Tax rebates are payable to the taxpayer even if they owe no tax. While many people qualify for the solar panel tax credit, there are some who do not. Anyone who does not owe federal income taxes will not be able to benefit from the solar tax credit in the current year. And, if you’re on a fixed income, retired, or only worked part of the year, you may not owe enough taxes to take full advantage of this solar tax credit.
A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. For example, claiming a $1,000 federal tax credit reduces your federal income taxes due by $1,000. Tax credits offset the balance of tax due to the government. You do not get a refund if you have no tax liability for the year your system goes into service. If you paid taxes through withholding or quarterly estimated filings, the ITC can still be applied, and the prepayments you made may be refunded. Keep in mind that the credit can be carried forward to the following year, which means that you can use any remainder from this year as a credit towards next year’s taxes.
Consult a qualified tax professional to understand any tax liability or eligibility for any tax credits that may result from the purchase of your solar system.
Year |
Available Solar Tax Credit |
2022-2032 |
30% tax credit for residential solar panels. |
2033 |
26% tax credit for residential solar panels. |
2034 |
22% tax credit for residential solar panels. |