It’s tax season again and that means it’s time to answer all your frequently asked questions about the federal solar tax credit for the 2022 tax season. Got lots of questions about it? Don’t worry, you’ve come to the right place. Let’s get right into it.
If you have additional questions about the 2022 solar tax credit, read more in our Guide to the Federal Solar Tax Credit.
1. What is the solar tax credit for 2022?
Simply stated, the solar tax credit, also known as the ITC is a 30% federal tax incentive on the cost of your solar panel system*.
It can be used on your 2022 federal taxes if:
- You purchased your solar system with cash or loan (leasing or PPA financing cannot claim the tax credit).
- You have federal income tax liability. See more about qualifications below.
2. How does the federal solar tax credit work?
The federal solar tax credit is a 30% tax credit that can be applied to your federal taxes during the year you have solar panels installed on your home.
Do you get a tax credit for installing solar panels?
Yes, as long as you purchase, instead of lease your solar panel system. The tax credit applies to the cost of equipment plus installation and can be applied to your federal income tax liability.
3. How much is the federal tax credit for solar panels?
The federal tax credit for solar panels is currently at 30%, its highest available rate. That means serious savings on your tax returns when it comes time to file. The current rate is thanks to the newly signed legislation which extended this increased rate through 2032, when it will drop back down to 26%.*
4. Does the solar tax credit include battery storage?
The federal solar tax credit also applies to home battery storage like the Tesla Powerwall. Get even more value from your home’s solar system by installing a backup battery like the Powerwall while the federal government is still offering the 30% tax credit. And, with the passage of the Inflation Reduction Act of 2022, you can get credit for battery energy storage even if it’s not connected to solar.
Can I add a battery to my system and still qualify for the solar tax credit?
Listen up homeowners who already own a solar system! This federal tax credit could also be for you if you decide to add a battery to your system. This big change came with the Inflation Reduction Act of 2022! You can add a battery to an existing solar energy system and get the same 30% tax credit as if you were including it in a new system.
5. Can I get a tax credit for leasing solar panels?
Unfortunately, you can only claim the solar tax credit if you purchase your solar panel system. This means with cash or with a solar loan. If you sign a lease or PPA with a solar installer, you are not the owner of the solar panel system and therefore you cannot receive the tax credit.
6. Do I qualify for the 30% solar tax credit?
Here are a few of the main eligibility requirements for the solar tax credit.
- Your solar system was ‘placed in service’ after January 1, 2022.
- The solar system is located at a residential location in the U.S. (but not necessarily your primary residence).
- You own the solar system ( you purchased it with cash or through financing)
- The solar system is new or being used for the first time. The tax credit can only be claimed on the “original installation” of the solar equipment.
A few other things to note when filing your taxes:
- If you received rebates or grants when installing your solar panels, you calculate the total cost after applying them, as rebates are meant to reduce your total cost. For example, if your solar panels cost you a total of $20,000, but your utility company offered you a rebate of $2,000, your total cost would be $18,000, which is the number you would use in your taxes.
- If you have a state tax credit for solar panels, in addition to the federal solar tax credit, you don’t need to do any extra math for your federal solar tax credit filing. State and federal tax credits are both calculated based on the total amount you paid.
7. Can you claim solar tax credit twice?
You cannot technically claim the solar tax credit twice if you own a home; however, you can carry over any unused amount of the credit to the next tax year for up to five years. Note: if you own more than one home with solar, you may be eligible. In this case, contact your tax professional to find out more.
8. What if the solar tax credit exceeds my tax liability?
This is a nonrefundable tax credit, meaning you will not get a tax refund for the amount of the solar tax credit that exceeds your tax liability. Same as the question above; however, you can carry over any unused tax credit to the next year.
9. Can I use the solar tax credit against the alternative minimum tax?
Yes. The tax credit can be used against either the federal income tax or the alternative minimum tax credit.
10. Is the solar tax credit going away?
Yes, but not for a while. In August 2022, the Inflation Reduction Act was signed into law. That legislation extended the credit through 2032 at an increased rate of 30%. In 2033, the rate drops back down to 26%. In 2034, it drops further, down to 22%. This is great news, making this a perfect time to go solar!
Here at ADT Solar, we provide high quality solar panels and installation service and do not lease solar panel systems. Our team of solar professionals will work with you to ensure you satisfy the requirements for this valuable federal solar tax credit. We will also provide you with a sample federal tax form to make filing easy.
Now is the time to take advantage of the solar investment tax credit. Contact our team of dedicated solar experts at ADT Solar today!
ADT Solar (formerly Sunpro Solar) does not provide tax advice. Be sure to speak with your tax consultant if you have questions about your personal situation.
Disclaimer: This webpage provides an overview and does not constitute professional tax advice or other professional financial guidance. It should not be used as the only source of information when making purchasing decisions, investment decisions, or tax decisions, or when executing other binding agreements.
*Tax and credits or incentives including those provided by federal, state, or local governments may change or end. This can impact the amount of money you might save. Consult a tax professional to understand any tax liability or eligibility for any tax credits that may result from the purchase of your solar system.
**If you have taxable income and own the system, you may qualify for the federal investment tax credit (ITC). It is your responsibility to determine your eligibility and to apply. Consult a qualified tax professional for assistance and details.