The Federal Solar Tax Credit: What It Is and What It Isn't

It's a tax credit, not a rebate

The federal Residential Clean Energy Credit is a nonrefundable credit you claim on your federal income tax return. It reduces the amount of federal income tax you owe for the year the system is placed in service. Nobody sends you a check for it, and it does not come off the price of the system at signing.

You have to own the system

The credit is available to the party that owns the equipment. If you pay cash or take out a solar loan, you own the system and you are the party who may claim it. If you sign a Power Purchase Agreement (PPA) or third-party lease, the financing company owns the equipment on your roof and is the party eligible to claim it — not you.

You have to actually owe federal income tax

Because the credit reduces federal income tax owed, the amount you can actually use in a given year depends on your personal tax liability. Homeowners with little or no federal tax liability may not be able to use the full credit in the year of installation. Whether unused amounts carry forward, and for how long, depends on current IRS rules.

The rules change — talk to your tax professional

The credit percentage, eligibility, and expiration schedule are set by federal law and change over time. Nothing in a solar proposal is tax advice, and no salesperson can promise you a specific dollar benefit. Before you rely on the credit in your household budget, confirm your specific situation with a licensed tax professional.

Frequently asked