Home Home Improvement Things You Should Know About the Solar Investment Tax Credit

Things You Should Know About the Solar Investment Tax Credit

solar energy

In the last decade, hundreds of thousands of solar panels have been installed across the United States. This rapid increase in solar power system installation may be due to reductions in system costs and greater product efficiency each year. However, some individuals may be looking forward to the tax advantages offered by solar tax credits, such as the solar ITC New Jersey.

Solar Investment Tax Credit

This federal policy supports renewable energy growth throughout the United States. This credit has encouraged a more than 10,000% solar energy adoption growth rate (52% annually) since its adoption in 2006. Not only has this credit increased jobs and investment in the US economy, but it has also stabilized the renewable energy industry.


Anyone who purchases and installs a solar power system is eligible for the ITC. This credit can be rolled into next year if your tax liability does not meet the credit threshold. However, you must purchase, not lease, your solar system to be awarded the credit. If you purchase your system through a loan or other credit account, you may still be eligible for the tax credit. Consult a tax professional for clarification.


From 2016-2019, the tax credit was 30%. In 2020, those who install residential or commercial solar systems receive a 26% credit on their taxes for the cost of the system and its installation. At the end of 2020, this rate will be reduced to 22%. In addition, the credit has no maximum, so no matter how expensive the system, you will be able to take up to 26% of it off on your taxes. However, after 2022, the tax credit will drop to 10% of the cost of the system.

Tax Credit

You can get the ITC by filling out IRS Form 5695. Then, add this information to your 1040 form. Because we are in the extension period of this credit, most tax software programs offer this credit in their default settings. However, if your taxes are competed by a CPA, tell your accountant about your purchase and share the invoices and expenses so you receive proper credit.

Your tax credit can be used to pay off outstanding tax debt or reduce your tax liability for the year.


Since its adoption, the ITC has encouraged rapid increases in solar power system sales. This credit, which incentivized clean energy production and usage in the US, helped business reduce their costs and increased economic stability.

Consider purchasing your solar system this year to gain the maximum tax credit.