The Federal Investment Tax Credit (ITC) is a federal tax incentive that allows taxpayers to claim a credit equal to a percentage of qualified solar system installation costs. Established by the Energy Policy Act of 2005, the ITC has been the primary federal incentive driving residential and commercial solar adoption. The credit applies to both photovoltaic systems and solar thermal systems for water heating.
Current ITC Specifications
As of 2024, the ITC covers 30 percent of all qualified installation expenses for residential and commercial systems through December 31, 2032. The credit decreases to 26 percent for systems installed in 2033 and 22 percent for systems installed in 2034. After 2034, the residential credit expires unless Congress extends it, while commercial systems retain a 10 percent credit indefinitely.
Eligibility and Application
The ITC applies to systems placed in service at residential properties, commercial buildings, and utility-scale installations. Battery storage systems installed with solar qualify for the credit. Homeowners claim the credit on IRS Form 3468, and unused credits can be carried forward to future tax years. System ownership is required; leased systems typically do not qualify for the ITC.