The Internal Revenue Service (IRS) provides a 30% of Investment Tax Credit for solar panels installed in the U.S. If you have installed solar panels in 2022 or are thinking about doing so, please refer to this article.
What properties are eligible for the solar power system tax credit?
Solar panels that qualify for tax deductions include;
- The solar panels must have been installed between January 1, 2017, and December 31, 2034.
- The solar power system must be installed in a U.S. residence. Residences include single-family homes, condominiums, townhomes, apartments, and vacation homes (villas).
- You must have purchased the solar power system with cash or financing and own the solar power system. If the property is a lease or a type of contract where you pay a fee for the use of the electricity generated by the system, you do not qualify for the credit.
- The solar panels must be brand new. The credit applies to the “first installation” of a solar power system.
(Source: energy.gov “Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics“)
What is the credit for solar power systems?
The following costs are deductible for solar panel installations
- Solar panels and solar cells
- Assembly and installation costs, labor costs for contractors for installation (including permitting, inspection, and developer fees)
- Wiring, inverters, installation stands, and other components
Energy storage devices with 3 kilowatt hours (kWh) or more (for systems installed after December 31, 2022). Storage devices installed in the following year in which the PV system is installed are also eligible, but the installation date requirement applies to the storage device. - Sales Tax on the above
Investment Tax Credit (ITC)
Solar panels installed before December 31, 2019, had a 30% investment tax credit, but in August 2022, Congress passed an extension of the investment tax credit (ITC), allowing those installed between 2022 and 2032 to The investment tax credit is now available for installations between 2022 and 2032.
As for future credits, they will decrease to 26% for systems installed in 2033 and 22% for systems installed in 2034. The tax credits are scheduled to expire in 2035 unless renewed by Congress.
2022~2032 | 30% |
2033 | 22% |
2034 | 22% |
2035~ | 0% |
Please note that the Solar Panel Investment Tax Credit does not apply to taxpayers who do not pay taxes to the federal government at the time of tax filing.
No additional property taxes
The tax assessment of a trustee on property taxes usually does not add to the assessed valuation value of a solar panel installation. Therefore, there is no additional property tax due to solar panel installation.
No deductions on a state-by-state basis
The Solar Panel Investment Tax Credit is a federal program and there is no tax exemption for solar panel installations at the state level. However, some states do offer a Solar Renewable Energy Certificate. In some cases, a $1000 electric bill is deducted for that year only.
Other Notes
Solar panels usually come with a two-year warranty, but the installer may, in the future, be gone. Therefore, we recommend that you purchase insurance for your solar panel.
For tax advice on solar panel credits, please contact Muso & Co. anytime.