The federal solar tax credit for 2023 is 30% of the cost of the solar photovoltaic system installed on your property. You can claim this amount when you file your taxes in 2024. So, for instance, if the cost of the equipment and the installation came up to $25,000, your federal tax liability could go down by 30%, i.e., $7,500, thanks to this credit. These considerable savings can go a long way in helping you break even on your investment much earlier.
Although the federal solar tax credit can only be claimed once, you can roll over the balance of the credit to the following year if what you owe the IRS is less than the credit amount. In the example above, if your overall tax liability was only $5,000, you could roll over the remaining $2,500 to claim during the next tax year. If you’re eligible to claim the credit, fill out IRS Form 5695 and include it as part of your tax return.
The 30% tax credit value will only apply until 2032. The Inflation Reduction Act, signed in 2022, outlines the federal solar tax credit schedule until 2034. While the credit was increased from 26% to 30% for solar panel installations made between 2022 and 2032, it will decrease to 26% in 2033. For the following year, 2034, the credit will decrease again to 22%.