The Federal Solar Investment Tax Credit (ITC)
The federal ITC allows you to deduct 30%% of the total cost of your solar panel system from your federal income taxes. This includes panels, inverters, batteries, installation labor, permitting, and sales tax on equipment. A $25,000 system yields a $7,500 tax credit.
Key Details
- 30%% credit for systems installed through 2032
- Drops to 26%% in 2033 and 22%% in 2034
- Applies to both purchased systems and batteries (added in 2022)
- No maximum credit amount
- Must be claimed in the tax year the system is placed in service
- If your tax liability is less than the credit, the unused portion rolls forward to the next tax year
See your cost after the tax credit.
Open Solar Panel Calculator →State and Local Incentives
Many states offer additional incentives on top of the federal credit. These vary widely and change frequently. Common types include state tax credits (additional 10-25%% in some states), property tax exemptions (solar does not increase your assessed home value for tax purposes), sales tax exemptions (no sales tax on solar equipment), performance-based incentives (paid per kWh produced), and rebates (one-time payment from your utility or state).
SRECs (Solar Renewable Energy Certificates)
In some states (New Jersey, Massachusetts, Maryland, Pennsylvania, DC, and others), your solar system generates SRECs for every 1,000 kWh (1 MWh) produced. You can sell these certificates on the SREC market. Prices vary from $15 to $400+ per SREC depending on the state and market conditions. In high-value states, SRECs can add $200-$1,000+ per year in income.
Net Metering
While not technically a tax incentive, net metering is a critical financial benefit. Earning full retail credits for excess solar production significantly improves your return on investment. Check our dedicated guide for details.
The combined value of federal + state incentives can reduce the effective cost of solar by 40-60%% in the best states. Always check the Database of State Incentives for Renewables & Efficiency (DSIRE) at dsireusa.org for the most current incentives in your state.