What Is the Federal Solar Tax Credit?

The Investment Tax Credit (ITC) lets you deduct 30% of the cost of your solar installation directly from your federal income taxes. It's not a deduction — it's a credit, which means it reduces your tax bill dollar for dollar.

For example: if your solar system costs $25,000, the ITC gives you a $7,500 credit against what you owe the IRS. If your credit exceeds your tax liability for the year, the unused portion rolls over to the following year.

What Does It Cover?

The 30% ITC applies to the entire installed cost of your solar system, including:

  • Solar panels or solar roof tiles
  • Inverters, mounting hardware, and wiring
  • Battery storage systems installed with solar (or added to existing solar)
  • Labor and installation costs
  • Permit fees and inspection costs
  • Sales tax on all eligible equipment

Important: battery storage systems installed without solar also qualify for the full 30% ITC as of the Inflation Reduction Act (August 2022).

Do I Qualify?

You qualify if you:

  • Own your solar system (purchased outright or via loan — not leased)
  • Have federal income tax liability equal to or greater than the credit amount
  • Install the system at your US primary or secondary residence, or as a business
  • Install between 2022 and December 31, 2032

If your tax liability is less than your credit, the remainder rolls forward to the following year(s). Renters do not qualify for the residential ITC.

How Do I Claim It?

You claim the ITC on IRS Form 5695 when you file your federal taxes for the year the system was placed in service. Aragon Solar provides you with all documentation needed: final invoice, interconnection approval date, and a completed Form 5695 worksheet.

ITC Timeline

Under the Inflation Reduction Act, the 30% credit is fully available through December 31, 2032. It then steps down to 26% in 2033 and 22% in 2034, with no credit after 2034 unless Congress acts.

Pro tip: If you're considering solar in 2025 or 2026, there's no financial benefit to waiting — the credit is 30% now and stays there through 2032. Earlier installation means earlier savings.

Stacking with State Incentives

The federal ITC stacks on top of all state incentives. In California, this means:

  • 30% Federal ITC
  • California SGIP rebate (up to $1,000/kWh for batteries)
  • California property tax exclusion (full value of solar addition exempt)
  • California sales tax exemption on solar equipment

In Arizona, you can stack the 30% federal ITC with Arizona's 25% state solar income tax credit (capped at $1,000) and full property and sales tax exemptions. Combined, Arizona homeowners can offset 33%+ of system cost through incentives alone.