Tax credits and rebates can slash the cost of going solar by thousands of dollars. The federal Investment Tax Credit (ITC) remains the most significant incentive, and many states add their own. Understanding these programs helps you plan your renewable energy investment and maximize savings.
The Federal Investment Tax Credit (ITC)
The federal ITC allows you to deduct 30% of the cost of a solar installation from your federal income taxes. This applies to both solar panels and battery storage when paired with solar. For a $25,000 system, that's a $7,500 credit. The credit was extended through 2032 at 30%, then steps down to 26% (2033) and 22% (2034) before expiring for residential in 2035.
What Qualifies for the ITC
Eligible costs include solar panels, inverters, mounting equipment, wiring, and labor. Battery storage added to a new or existing solar system also qualifies. The system must be installed on your primary or secondary residence in the United States. Leased systems don't qualify—the lessor claims the credit.
- Solar photovoltaic (PV) panels
- Inverters and mounting hardware
- Battery storage (when paired with solar)
- Installation labor
- Permitting and inspection fees
State-Level Incentives
Many states offer additional incentives. These can include upfront rebates (dollars per watt), performance-based incentives (payments for energy produced), property tax exemptions, and sales tax exemptions. State programs change frequently—check your state energy office or DSIRE (Database of State Incentives for Renewables & Efficiency) for current offerings.
Examples of State Incentives
California offers various rebates through utilities and the state. New York has NY-Sun incentives. Massachusetts has the SMART program. Some states offer property tax exemptions so your home's assessed value doesn't increase with solar. Sales tax exemptions reduce upfront cost in applicable states.
"Stack incentives whenever possible. Federal ITC + state rebate + utility rebate can reduce your net cost by 50% or more. Plan your installation timing to capture available programs."
Battery Storage Credits
Under current rules, battery storage qualifies for the ITC when installed alongside new solar. Standalone batteries may qualify in some cases. The credit applies to the full cost of the battery system, including installation. This makes adding storage more affordable for homeowners seeking backup power or peak shaving.
How to Claim the Credit
When you file your federal taxes, use IRS Form 5695 (Residential Energy Credits). Enter your qualified solar costs and calculate the credit. The credit then flows to your Form 1040. Keep all receipts and documentation from your installer. Consult a tax professional if your situation is complex.
Other Renewable Incentives
Beyond solar, the federal government offers credits for geothermal heat pumps, small wind turbines, and fuel cells. State and utility programs may support these technologies as well. ElectriBill's calculator can help you model savings from efficiency and renewable upgrades to see how incentives affect your payback.
Tax credits make renewable energy more accessible than ever. Plan ahead, document everything, and take full advantage of federal and state support.