Federal Solar Tax Credit Explained

The Federal Solar Investment Tax Credit (ITC) is one of the most significant incentives for homeowners and businesses switching to solar. It allows you to deduct a percentage of the cost of installing a solar energy system from your federal taxes.

As of 2025, the tax credit covers up to 30% of the total system cost, including panels, labor, and even some associated upgrades. That means if your solar system costs $20,000, you could receive a $6,000 credit on your taxes.

This credit applies to both residential and commercial systems and does not have an income limit. It’s a powerful way to reduce your upfront investment and shorten the payback period of your solar system. To qualify, the system must be installed on a property you own, and you must have a tax liability to claim the credit.