Solar Tax Benefits Explained

By Solar United Neighbors on November 8, 2023

Are you curious about the tax benefits of going solar? You may have heard about tax incentives for homeowners who invest in rooftop solar, but don’t understand how it all works. 

In this guide, we’ll cover:

  • the basics of solar tax benefits, 
  • the Inflation Reduction Act’s impact, and 
  • the benefits that await you.

If you have more questions about the benefits of going solar, our Solar Help Desk is a great place to start.

Federal solar tax incentives

The main federal incentive to help you go solar is a tax credit.. Tax credits represent a reduction how much income tax you’ll have to pay in a given year.. To illustrate, let’s say you claim a $500 federal tax credit. This translates to a direct $500 reduction in the federal income taxes you owe. The federal government offers a 30% residential solar tax credit. That means that 30% of what you spent on going solar can be reduced from your income taxes.

The recently enacted Inflation Reduction Act (IRA) made important changes to the tax credit for homeowners. . The IRA extends and modifies these federal solar tax credits, making solar energy even more accessible and affordable for homeowners.

Wondering what’s included in this tax credit? Here’s what is covered:

  • Solar panels
  • Labor costs for permits, installation, inspections, and fees
  • Balance-of-system equipment, which covers wiring, inverters, and mounting gear
  • Energy storage devices with a 3 kWh capacity or more
  • Sales tax

If you’re a farmer or rural small business owner, you may be eligible for additional grants and loans through the Rural Energy for America Program.

State solar tax incentives

Some states offer additional incentives that can stack with federal benefits. These benefits could include additional credits, grants, rebates, and waived fees.

For an in-depth look at incentives available in your state, check out our state guides here.

Get started

Going solar helps you save money and take control of where your electricity comes from. It is well within reach for your family. Our personalized Solar Help Desk takes the complexity out of solar so you can make an informed decision.

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