What is the Federal ITC?
The Federal Investment Tax Credit (ITC) is one of the most significant financial incentives for going solar in the United States. As of 2026, it allows homeowners to deduct **30% of the cost of installing a solar energy system** from their federal taxes. This applies to both residential and commercial systems.
Eligibility Requirements
To qualify for the ITC, you must meet the following criteria:
- You must own your solar PV system (cash purchase or solar loan). Leased systems and PPA arrangements do **not** qualify for the homeowner credit (the leasing company claims it).
- The system must be located at your primary or secondary residence in the United States.
- The system must be new or being used for the first time.
What Expenses are Covered?
The 30% credit applies to a wide range of costs associated with your installation, including:
- Solar panels and photovoltaic cells.
- Installation labor costs, including permitting, inspection, and developer fees.
- Balance-of-system equipment, including wiring, inverters, and mounting hardware.
- Energy storage devices (solar batteries) with a capacity rating of 3 kilowatt-hours or greater.
- Sales taxes on eligible expenses.
How to Claim the Credit
You claim the ITC when you file your annual federal tax return. You will need to complete IRS Form 5695 and include the result on your standard Form 1040. It is a dollar-for-dollar reduction in the income tax you owe. If you don't have enough tax liability to use the entire credit in one year, the remainder can often be carried forward to future tax years.
Note: We recommend consulting with a qualified tax professional to understand exactly how the ITC applies to your specific financial situation.