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  • Writer's pictureKerry Lipp

The 30% Federal Tax Credit for Solar



The Residential Renewable Energy Tax Credit is a federal incentive which offers a 30% tax credit to property owners who install one or more of the following:

  • Solar electric

  • Solar thermal

  • Geothermal heat pumps

  • Small windpower

  • Fuel cells

This incentive was started in 2006 and will end on December 31, 2021. The credit for solar electric systems will taper off as follows:

  • 30% for systems placed in service by 12/31/2019

  • 26% for systems placed in service after 12/31/2019 and before 01/01/2021

  • 22% for systems placed in service after 12/31/2020 and before 01/01/2022

  • There is no maximum credit for systems placed in service after 2008

  • .Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.

  • The home served by the system does not have to be the taxpayer’s principal residence.

To claim this credit you should speak with your tax professional and fill out IRS form 5695.

Open form 5695 in new tab here.

Note that any unused credit can be carried over to the following year if the credit exceeds your tax liability. There is no maximum amount to this credit. The amount of the credit is 30% of the system cost after rebates.

For example, the average 2019 cost of a solar PV system in the US is $3.14/Watt before incentives (from energysage which has great info).

In New York state the cost can range from 2.92/Watt to 3.82/Watt. Keep in mind that this is for a grid-tied, roof mounted system with no battery storage. A ground mounted solar system will cost more. So will off-grid systems and systems that have batteries for backup power. These are all eligible for the 30% federal tax credit.

Back to our example: an average system of 6kW will cost roughly $18,000 (6000 x 3).

After the .35/W NYSERDA cash rebate which is paid directly to the contractor, the cost of the system is $15,900 (18000 -(6000 x .35)). The federal tax credit would be $4,770 (15900 x 0.3). In NY there is also a 25% state tax credit which is covered in a different post. The NY tax credit in our example would be $3,975 (15900 x .25). So the net cost of our example system without any other incentives would be $7,155 (15900 - 4770 - 3975). This is almost $1 per Watt installed which is unbelievable since in 2007 the cost of modules alone was $4/Watt.

Keep in mind that the federal tax credit will never be higher than in 2019 and that it scales back and goes away at the end of 2021.

  • 2019.......................30%

  • 2020.......................26%

  • 2021.......................22%

  • 2022 and beyond....0%

Details for this incentive can be found here. The link to the federal site was broken at the time of this writing due to the govt shutdown so I could not access it.

More helpful incentive info can be found at www.dsireusa.com


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