FAQs About the Federal Solar Tax Credit in 2024

The solar tax credit makes going solar more affordable in many households. Taxpayers can receive a credit for a percentage of what they spend on solar.

But, like many tax laws, credit requirements can change annually. Now that the 2023 tax year is over, we look forward to the coming year and wonder what the solar tax credit 2024 will have in store. This article will review some key points.

Q: Will There Be Changes to the Solar Tax Credit in 2024?

No, there will not be any changes to the solar tax credit in 2024. The 2022 Inflation Reduction Act increased the credit by 22% to 30%. It also extended the tax credit through to 2032. Therefore, it will remain at 30% for the next eight years.

After 2032, the tax credit is expected to decrease to 26% in 2033 and 22% in 2034. In 2035,  the bill may be renewed or eliminated.

Q: What is the Solar Tax Credit 2024?

A tax credit lowers your taxable income so you pay less tax. The solar tax credit lowers your taxable income by 30% of your solar investment. So if you paid $20,000 for your solar panel, you would be eligible for a $6,000 credit.

If your total taxable income is $100,000, it would be lowered to $94,000. Once the credit is applied, you will only pay taxes on the $94,000.

The credit can also roll over to the next year if your tax credit exceeds your liability. For example, if 30% of your panel expenses equals $6000 and you only have $3000 in taxable income, the additional $3000 will roll over into the next tax year. The credit will be applied to those taxes.

The credit accounts for 30% of your solar panel equipment and installation costs. It does not apply to any modifications made to support the panel.

Q: Who is Eligible for the Solar Tax Credit 2024?

Certain requirements apply to become eligible for the solar tax credit including the following:

Your solar system must be installed between Jan. 1, 2017, and Dec. 31, 2034.

  • The system must be installed in the residence stated on your tax return. The residence can be a house, a mobile home, a condominium, a coop, or a manufactured home.

  • You must own your solar panel. You cannot be eligible for a tax credit if you lease your panel or have a power purchase agreement (PPA) with your solar installer. However, you may be eligible. If you financed your panel or purchased a share in an off-site community solar project with energy credited against and not exceeding your home’s usage.

  • The system is new, or you have just begun using it. The credit must be claimed within the same year of new use or installation unless it’s rolling over from the previous year. You cannot receive the solar tax credit twice unless you purchase a second system.

There is no income limit to receive the solar tax credit 2024.

Q: What is the Solar Tax Credit Extension Act?

As explained earlier, the Solar Tax Credit Extension Act is part of the 2022 Inflation Reduction Act. It extended the 30% tax credit to 2032. In 2033, the credit will fall to 26%. In 2022 it will fall to 22%. It will phase out by 2035 unless it is renewed.

In addition to extending the credit, the Act expanded eligible equipment to include energy storage devices with a capacity rating of 3 kilowatt hours (kWh) or more, including standalone storage. The U.S. Department of Energy recommends pairing these devices with storage systems for enhanced energy use.

Q: What Equipment Does the Solar Tax Credit 2024 Cover?

Considering the extension act, the federal solar tax credit now covers the following equipment.

  • Solar panels or PV cells

  • Solar water heaters

  • Energy storage devices with a capacity of 3kWh or more

  • Contractor labor expenses

  • Permit fees

  • Inspection costs

  • Developer fees

Your equipment must also meet certain requirements as follows:

  • Solar Water Heaters: Solar water heaters must feature a solar collector and storage tank that enables solar energy to heat the water. They must also be certified by the Solar Rating Certification Corporation or a similar state-endorsed entity.

  • Solar Panels (Photovoltaic Systems) Solar panels or PV panels convert sunlight into energy. Monocrystalline, polycrystalline, and thin-film panels can be claimed for a tax credit.

  • Energy Storage Devices: Energy storage devices such as batteries may be included in the tax credit provided the capacity rating is 3 kilowatt hours or more.

Q: How Do I Claim the Solar Tax Credit?

You can claim the tax credit by filling out IRS tax form 5695. Your tax consultant can help with the process, but if you do your taxes, here’s what you need to know.

  1. Calculate the tax credit amount in Part 1.

  2. Your system should be classified as “qualified solar electric property costs”.

  3. Put the total cost of the system on line 1. It should not include the costs of related structural modifications.

  4. Perform the calculation on lines 6a and 6b.

  5. List tax liabilities on line 14. The IRS instructions on the form will provide more information on these liabilities.

  6. Complete the calculations on lines 15 and 16.

  7. Enter the figure from line 15 on line 5 of form 1040.

You may also need to provide additional documentation to prove your purchase. Your solar provider will give you any paperwork you need.

Q : What Other Incentives Will Save Me Money?

Other incentives can be combined with the solar tax credit 2024 to make solar even more affordable. Your options include:

  • State Tax Credits: Your state may provide tax credits for solar installation. They will reduce the income of your state taxes rather than your federal taxes. Credit amounts will vary by state.

  • State Rebates: Some state governments will provide rebates to homeowners who go solar. The rebates will not apply to your taxes. They will typically be available as a check or direct deposit.

  • Solar Renewable Energy Certificate: Solar Renewable Energy Certificates (SRECs) are part of the EPA Green Partnership. State-level credits allow you to earn 1 SREC for every MWh of solar electricity you generate. The money you can earn from your SRECs varies from state to state. SRECs in states with an oversupply due to less solar energy use will offer less money for SRECs. People in states with an undersupply will earn more with their SRECs.

  • Local Utility Rebates: Some utility companies offer rebates to customers that go solar. These rebates will affect your solar tax refund. The rebate amount will be subtracted from your solar system cost before your credit is calculated.

  • Subsidized Loans: State programs and utility companies offer subsidized loans that defer interest or offer low interest rates to qualified families. Families may need to prove they are low-income to qualify.

  • Tax Exemptions: Some businesses and homeowners may qualify for a property tax exemption which will exclude the increased value of the solar system from the home assessment. You may have to meet certain requirements to qualify which vary from state to state. You will need to apply for the exemption through your tax assessor.

Most incentives can be claimed alongside the 2024 solar tax credit. However, some may reduce your solar system costs and lower your tax credit amount.

Q: Can I Use the Solar Tax Credit 2024 if I Do Not Owe Any Taxes?

No, the tax credit can only be applied to your tax liability. If you do not owe any taxes, you will not be eligible for the credit. However, because the credit rolls over, you may be able to claim it the following tax year, provided you owe taxes that year.

Q: When is the Best Time to Invest in Solar?

The solar tax credit is set to reduce from 30% to 26% in 2033. If you apply for the tax credit now, you could get a rebate of around $4800 considering the average system costs about $16,000. In 2034 and 2035, tax credits will be closer to $4160, a reduction of $640.

The tax credit may go away completely after 2035 so it’s best to strike while the iron is hot. If you have the budget to go solar now, you may consider making the switch.

Q: Will the Tax Credit Be Extended Beyond 2035?

The government extended the tax credit in 2022 to incentivize people to help the country reach its solar goals. It also considered the state of the economy.

The credit may be extended again. However, the decision will be based on the economy, the solar industry, and the government. Officials have not stated that there will be another extension, and it is best to assume things won’t change.

How Do I Find the Best Solar Installer?

Solar America can help you find the best solar installer before the solar tax credit 2024 goes away. Enter your information in our database, and we will return a list of local installers. The competitive nature of our platform ensures you get the lowest possible prices. Choose the providers best suited to your needs and budget to move forward on your solar journey.

Contact us to take advantage of all the rebates and programs offered for solar installation in 2024.

"I’d put my money on the sun and solar energy. I hope we don’t have to wait till oil and coal run out before we tackle that." - Thomas Edison

"I’d put my money on the sun and solar energy. I hope we don’t have to wait till oil and coal run out before we tackle that." - Thomas Edison