The Federal Solar Tax Credit (ITC)

Southern Californians looking to install solar panels at their homes will need to understand how the federal solar tax credits work to maximize their savings. Knowing how the federal solar tax breaks work can help homeowners get the best deal possible when purchasing solar panels and help cover some of the installation costs.

-May 2025 Update!-

Lock In Your 30% Solar Tax Credit While You Still Can

Thinking about going solar? 2025 may be your last, best chance to take advantage of the Federal Solar Investment Tax Credit (ITC). This credit lets you deduct 30% of your total solar installation cost—including panels, batteries, and labor—from your federal taxes. But don’t wait: a bill passed by the U.S. House in May 2025 aims to end this credit after December 31, 2025.

It’s not law yet, but the message is clear: the clock is ticking.

The Investment Tax Credit, sometimes known as the "solar tax credit" or "ITC," is an incentive program offered by the U.S. government through the Internal Revenue Service (IRS) to encourage Americans to install energy-efficient solar panels on their homes. In 2022, the Inflation Reduction Act restored the credit to its full 30% and extended it through 2032. Read more from the Department of Energy. However, current legislation threatens to shorten this window.

So it's important that you act now to ensure that you don't miss out on a great opportunity to save on your solar installation!

What is the Federal Solar Tax Credit (ITC)?

Since 2005, the federal government has encouraged homeowners to go solar through the Investment Tax Credit (ITC).

If you install a solar system in 2025, you can still claim the full 30%. For the average system, this means savings of $6,000–$10,000 or more.

However, that could change. A recent House bill would eliminate the credit after this year. If passed, 2025 would be the final year to claim this major savings. Learn more about the proposed legislative change from Solar Power World.

Determining Eligibility for the Federal Solar Tax Credit

To take advantage of the credit, make sure you meet these requirements:

Your system was installed during the tax year you're claiming.
You have enough federal tax liability to apply the credit.
You own your solar system (purchased outright or financed).
Roof work required for solar may be partially eligible—ask a tax professional.
Battery systems (like Tesla Powerwall or Enphase) also qualify, even if added after the solar install.

How To Claim Your Solar Tax Credit

1. Download IRS Form 5695.

2. In Part 1, enter your total solar system cost as "Qualified Solar Electric Property Costs."

3. Complete Lines 6a and 6b.

4. Use the worksheet to calculate any tax liability limitations (Line 14).

5. Enter the credit on Line 15 and transfer that number to Schedule 3 (Form 1040), Line 5.

We strongly recommend consulting a licensed tax professional to ensure accuracy. View the official IRS instructions.

Lock In Your 30% Credit Before It’s Gone

This may be your last chance to take advantage of:

30% off solar and battery installation costs
Up to $10,000 in savings
California battery rebates (SGIP)
Zero increase in property taxes
Big savings on electric bills

Don’t wait for Congress to change the rules. Act now and let Sunny Solar Power help you start saving.

Why 2025 Is the Smartest Time to Go Solar

The full 30% tax credit is still available
But a new law could reduce or cancel it after this year
Battery storage is now eligible
California property tax exclusion through 2026 (Learn more)
SDG&E rates are among the highest in the U.S.

Waiting could cost you. Going solar today means locking in incentives before they disappear.

Frequently Asked Questions about the Federal Solar Tax Credit

Here we cover some of the most commonly asked questions regarding the solar investment tax credit (ITC).

When am I eligible for the federal solar tax credit (ITC)?

If your system is installed and operational during the year you claim, and you own it (outright or financed), you're eligible.

What should I do if the credit is higher than my tax liability?

You can roll over unused credit to future tax years. See IRS rollover rules.

What is the income limit for the ITC?

There’s no income limit. All taxpayers with sufficient federal tax liability can qualify.

Is it true the credit is ending?

Currently, the credit is set to remain at 30% through 2032. However, a bill passed by the House in May 2025 proposes ending the credit after December 31, 2025. It’s not law yet—but it’s a risk.

Does the credit cover batteries?

Yes! As of 2023, standalone home battery systems qualify for the 30% credit—even if installed separately from solar.

Can I claim the ITC more than once?

Not for the same property. But if you install solar on multiple homes you own, you may qualify—check with a tax expert.

What if I don’t owe taxes this year?

You can’t use the credit if you don’t owe taxes, but the unused portion will carry forward for up to 5 years.