The solar investment tax credit (ITC) is a 30% tax credit that you are allowed to claim in the form of a Credit from your income taxes (after any available rebates) off the overall gross system cost, including any necessary upgrades to the main panel box upgrades in order to go solar.

In August 2022, the Inflation Reduction Act increased the tax credit from 26% to 30% and extended it until 2032. It also renamed it the Residential Clean Energy Credit (although most people still call it the ITC or solar tax credit).

So if you purchased a solar system worth $25,000 in 2022, you can claim up to a $7,500 credit against your tax liability on your 2022 taxes that you file in early 2023.

The new and improved solar tax credit also applies to battery storage, whether or not it’s connected to solar. So you can claim the tax credit for adding battery storage to an existing solar system or for battery storage that’s not connected to solar at all.

Federal solar tax credit

Tax Credits are different and more valuable than Tax Deductions

How to use your Federal Tax Credit

In many instances, the 30% Tax Credit results a reduction in the tax liability 

This results in Free Cash Flow in your pocket.

Many homeowners will do one or more of the following:

1. Put the money in your savings or investment account

2. Use the money for another home project such as a new roof, new siding, bath, kitchen etc

3. Pay off other debt such as, credit cards or car loans