How Do Solar Tax Incentives Work?

May 3, 2022

You just bought solar power for your home and you have seen the great monthly savings it has provided. You probably get happy to see the amount of money you have been able to save. If you already got solar, did you see what incentives your area provides? The U.S. government since 2006 has funded the solar department and states have created a policy to help homeowners become solar called the Solar Investment Tax Credit (ITC).  The incentives differ from state to state. The tax incentive is the amount of money the government gifts you for switching to a green energy option.  


The incentive is based on the size of system you get and how much your area is paying you to get solar. Homeowners do have certain requirements you need to be able to qualify for solar and incentives, you can find a list of solar requirements online. It is good to check with your state guidelines to see what kind of incentives you qualify for. The incentives can help drive down the cost of your solar energy installation by giving you back some of that money you spent. This is really beneficial because homeowners can claim it on their taxes for a bigger payout.

Solar energy customer filling out solar incetive form 5695

Solar energy customer filling out a 5695 form.

The tax incentives are done when doing your yearly taxes, you need to have proper paperwork when doing taxes to get the proper credits you deserve. The form you must file when doing your taxes to claim your credit is an IRS Form 5695. You can ask your local tax representatives for more information on what you need to complete the form. If the incentives are state based then you must go onto your state’s official website and find out how to redeem those incentives. Once you go through the process, you will get the tax incentive included with the rest of your tax return.

When the solar ITC started it was crediting 30% of the cost of the solar system but in 2020, it dropped down to 26% until 2022. As time goes on, more people will switch to solar energy and thus step down on the percentage of the incentive. That is why it is best to go solar as soon as possible to reap the most benefits possible before they go down. The amount also differs depending on location. Some locations will credit more than others and that’s why it is good to look up what your area offers. You can visit your state government website to find out for more incentives they provide that are not part of the government incentives

Solar Incentives has really helped push homeowners to move over to green renewable energy. That process will require you to become the owner of your energy, then you don’t have to rely on the power utility company to provide energy for you. The incentives for solar comes in different ways but taxes have been optimized to reward you for the specific size of the panel. The fight for global change has pushed these incentives but as they become more common, the incentives become a lot lower. If you want the most benefits from solar, the time to go solar is now. 

Solar Energy Customer

Solar Energy Customer with solar just installed.

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