The 30% Federal Solar Tax Credit: Complete 2024 Guide

The federal solar investment tax credit (ITC) is the most valuable solar incentive available to American homeowners. Under the Inflation Reduction Act of 2022, the credit was extended and increased to 30% through 2032.

What Is the Solar Tax Credit?

The ITC allows you to deduct 30% of your total solar system cost from your federal income taxes. This includes panels, inverters, batteries, installation labor, permitting, and inspection fees.

It's a tax credit — not a deduction. A deduction reduces your taxable income; a credit directly reduces the taxes you owe. If your system costs $25,000, you get a $7,500 credit against your federal tax bill.

What's Included in the Credit

The 30% credit applies to:

• Solar panels
• Inverters (string, microinverters, power optimizers)
• Battery storage (Tesla Powerwall, Franklin, Enphase IQ)
• Racking and mounting hardware
• Wiring and electrical work
• Installation labor
• Permitting and inspection fees
• Sales tax on equipment

Who Qualifies

To claim the credit, you must:

• Own (not lease) the solar system
• Install it at your primary or secondary U.S. residence
• Owe federal income taxes (the credit is non-refundable)

If you lease your solar system, the leasing company claims the credit — which is why lease payments are lower than loan payments for the same system.

How to Claim It

Claiming the credit is straightforward:

1. Complete IRS Form 5695 (Residential Energy Credits) with your tax return
2. Enter your total solar system cost on line 1
3. Calculate 30% — that's your credit amount
4. The credit reduces your federal tax liability dollar-for-dollar

If your credit exceeds your tax liability in year 1, the unused portion carries forward to the following year.

Credit Schedule

The 30% credit is available through 2032. After that:

• 2033: 26%
• 2034: 22%
• 2035 and beyond: 0% (unless Congress extends it)

California State Incentives

In addition to the federal credit, California offers:

• Property tax exclusion — solar installations are excluded from property tax reassessment
• Sales tax exemption — solar equipment is exempt from California sales tax
• SGIP rebate — the Self-Generation Incentive Program offers rebates for battery storage in certain utility territories

The Bottom Line

The 30% federal tax credit is a substantial incentive that significantly reduces the cost of going solar. Combined with California's property tax exclusion and NEM 3.0 savings, solar is one of the best financial decisions a California homeowner can make.

Consult a tax professional for advice specific to your situation. Pell Solar can provide the documentation you need to claim the credit.

Get a free quote and see your estimated tax credit →