When you install a solar power system, the federal government rewards you with a tax credit for investing in solar energy.
A tax credit is a dollar-for-dollar reduction of the income tax you owe or will receive back. $1 credit = $1 less you pay in taxes. It’s that simple.
A quick but necessary disclaimer: we’re solar experts, not tax accountants! We do our best to give accurate advice, but please check with a professional to be sure you’re eligible to claim the credit.
For example, let’s say you owe $5,000 in federal taxes this year. If you claim a $3,000 tax credit, that pays off part of your liability. You would be left to pay just $2,000 in taxes after the credit is applied.
It’s different than a refund because you have to owe taxes to claim the incentive. But since most people owe taxes, most people end up being eligible.