On December 2015 the Congress of the United States of America approved the 2016 federal spending bill and extended the solar panel tax credit, then the 2018 bill contained a 5 year extension of such credit extension, which makes solar energy more affordable to all Americans.

How does this tax affect me?

The federal solar credit, also knowns as the investment tax credit (ITC), allow the homeowner to deduct 30% (1) of the total cost of installing a solar energy system from your Federal taxes. The ITC applies in both residential and commercial systems, and there is no cap on its value.

The main requirement for solar tax credit eligibility is that you own your solar energy system (rather than lease it from a third party provider). Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect.

Your solar battery’s eligibility for the ITC is slightly more complicated. The battery itself isn’t considered renewable energy, because it can also be charged by grid electricity. In order to get the tax credit benefits, your battery needs to be charged by renewable energy.

Eligibility for residential properties

If you are installing energy storage on a residential property, it is eligible for a credit under the ITC – as long as the battery is only charged by an on-site renewable energy system like solar. If you don't have solar panels, and plan on charging the battery with electricity from the grid, it isn't eligible for the 30 percent solar tax credit.

Eligibility for commercial properties

If you are installing energy storage on a commercial property, it is eligible for a credit under the ITC as long as the battery is charged by a renewable energy system more than 75 percent of the time. The exact value of the federal tax credit for batteries depends on how frequently the battery is charged by a renewable energy system. To claim the full value, the battery needs to be charged by renewable energy 100 percent of the time. Otherwise, the credit is based on the portion of renewable energy it receives.

(1) While the solar investment tax credit is currently available to homeowners at its full 30 percent value, it won’t be around forever. This solar incentive will be phased out starting in 2020, with the exception of commercial solar installations.

• • 2017 – 2019: The tax credit remains at 30 percent of the cost of the system.
• • 2020: Owners of new residential and commercial solar can deduct 26 percent of the cost of the system from their taxes.
• • 2021: Owners of new residential and commercial solar can deduct 22 percent of the cost of the system from their taxes.
• • 2022 onwards: Owners of new commercial solar energy systems can deduct 10 percent of the cost of the system from their taxes. There is no federal credit for residential solar energy systems.

** Every individual's tax situation is different. Please consult a tax professional to make sure your situation is applicable.**

• • The home served by the system does not have to be the taxpayer’s principal residence.
• • If the federal tax credit exceeds your tax liability, the excess amount may be carried forward to the succeeding taxable year.
• • There is no ceiling on the tax credit
• • Applies to equipment and installation costs
• • For Residential Renewable Energy Systems, use IRS Tax Form 5695 to report your expenses. (It can be used for any residence, not just your primary one.)
• • Commercial systems have similar guidelines as residential systems but use IRS Tax Form 3468.