How much is the federal solar tax credit in 2026?

The federal solar Investment Tax Credit (ITC) is 30% through 2032 under the Inflation Reduction Act. This means you can deduct 30% of the total cost of your solar energy system from your federal taxes. The credit steps down to 26% in 2033 and 22% in 2034.

Can I claim the solar tax credit if I lease my panels?

No. You must own the solar energy system to claim the ITC. If you lease panels or sign a power purchase agreement (PPA), the leasing company claims the credit instead. Purchasing your system outright or financing through a solar loan qualifies you for the full credit.

Does the solar tax credit apply to battery storage?

Yes. Since 2023, standalone battery storage systems qualify for the 30% ITC, even if they are not paired with solar panels. Previously, batteries had to be charged at least 80% from solar to qualify. The Inflation Reduction Act removed this requirement.

What happens if my tax credit is larger than my tax bill?

If the ITC exceeds your federal income tax liability for the year, you can roll over the remaining credit to the following tax year. The credit cannot be refunded directly, but it carries forward so you do not lose it.

Do I need to itemize deductions to claim the solar tax credit?

No. The solar ITC is a tax credit, not a deduction. You claim it on IRS Form 5695 regardless of whether you take the standard deduction or itemize. The credit directly reduces the amount of tax you owe.

Federal Solar Investment Tax Credit (ITC) Guide 2026

The federal solar Investment Tax Credit is the single most valuable incentive available to American homeowners going solar. Thanks to the Inflation Reduction Act of 2022, the credit remains at 30% through 2032, saving the average homeowner thousands of dollars on their solar installation.

What Is the Solar Investment Tax Credit?

The Investment Tax Credit (ITC) is a dollar-for-dollar reduction in your federal income tax liability. Unlike a deduction, which reduces your taxable income, a tax credit directly lowers the amount of tax you owe. If you install a qualifying solar energy system, you can claim 30% of the total project cost as a credit on your federal return.

The ITC was originally established in 2006 and has been renewed and expanded several times. The most recent extension came through the Inflation Reduction Act (IRA) of 2022, which locked in the 30% rate through the end of 2032 and added new provisions for battery storage and domestic manufacturing bonuses.

ITC Rate Schedule

The credit percentage changes over time. Here is the full schedule under current law:

Federal Solar ITC Rate Schedule | Source: IRS, Inflation Reduction Act of 2022
Tax Year	ITC Rate	Status
2022-2032	30%	Current rate (Inflation Reduction Act)
2033	26%	First step-down
2034	22%	Second step-down
2035+	0%	Expires for residential (unless renewed)

The key takeaway: there is no rush to install in 2026, but waiting until 2033 or later will cost you more. The 30% rate is guaranteed through year-end 2032, giving homeowners a comfortable window to plan and install.

What Costs Qualify for the ITC?

The ITC covers far more than just the solar panels themselves. The following costs are eligible:

Equipment Costs

Solar panels (modules)
Inverters (string, micro, or hybrid)
Racking and mounting hardware
Wiring, conduit, and electrical components
Battery storage systems (standalone or paired with solar)
Monitoring equipment

Installation and Soft Costs

Installation labor
Permitting fees
Inspection costs
Engineering and design fees
Sales tax on eligible equipment (in states that charge it)

What Does NOT Qualify

Roof repairs or replacement (unless integral to the solar installation)
Tree removal for reduced shading
Landscaping or aesthetic upgrades
Grid connection fees charged by the utility (some exceptions apply)

How to Calculate Your Solar Tax Credit

Calculating the ITC is straightforward. Multiply your total eligible system cost by the applicable rate.

ITC savings examples at the 30% rate | Costs are pre-incentive estimates for 2026
System Cost	30% ITC Credit	Net Cost After ITC	Typical System Size
$12,000	$3,600	$8,400	4 kW
$18,000	$5,400	$12,600	6 kW
$24,000	$7,200	$16,800	8 kW
$30,000	$9,000	$21,000	10 kW
$42,000	$12,600	$29,400	14 kW + battery

Battery Storage: A Major Expansion

One of the most significant changes from the Inflation Reduction Act is that standalone battery storage now qualifies for the 30% ITC. Before 2023, batteries had to be charged at least 80% by solar panels to be eligible. Now, you can:

Install a battery system without solar panels and still claim the credit
Add battery storage to an existing solar system and claim the credit on the battery costs
Include battery costs as part of a new solar-plus-storage installation

Popular residential battery systems like the Tesla Powerwall, Enphase IQ Battery, and Franklin WH typically cost $10,000 to $18,000 installed. At a 30% credit, that means $3,000 to $5,400 in tax savings on storage alone.

Step-by-Step: How to Claim the Solar Tax Credit

Step 1: Install Your System

Work with a qualified solar installer. Make sure you receive detailed invoices showing all eligible costs. The system must be placed in service (operational and connected) during the tax year you plan to claim the credit.

Step 2: Gather Documentation

Collect the following:

Final invoice with itemized costs
Proof of payment
Interconnection agreement with your utility
Manufacturer certifications for equipment
Building permits

Step 3: File IRS Form 5695

When you file your federal tax return, complete IRS Form 5695 (Residential Energy Credits). The credit amount from Form 5695 transfers to your Form 1040 (Schedule 3, Line 5).

Step 4: Carry Forward if Needed

If your tax credit exceeds your tax liability for the year, the remaining amount rolls forward to the next tax year. You do not lose any unused credit.

Common Mistakes to Avoid

Claiming the credit on a leased system. Only system owners qualify. If you lease or have a PPA, the financing company claims the ITC.
Forgetting to carry forward unused credit. If your tax bill is smaller than your credit, the remainder carries to next year. Do not leave money on the table.
Missing eligible costs. Include permitting fees, sales tax, and labor. Many homeowners undercount their eligible expenses.
Waiting too long. The 30% rate is stable through 2032, but installation timelines can stretch 2 to 6 months. Plan ahead, especially if you want to claim the credit for a specific tax year.
Confusing tax credits with tax deductions. The ITC is a credit that reduces your tax dollar-for-dollar, not a deduction that reduces your taxable income. The ITC is significantly more valuable.

Federal ITC vs. State Incentives

The federal ITC is just one piece of the puzzle. Many states offer additional incentives that stack on top:

Common state and local solar incentives | Check DSIRE for your state
Incentive Type	Example	Stacks with Federal ITC?	Typical Value
State Tax Credit	SC 25% state credit	Yes	10-25% of cost
Utility Rebate	Duke Energy $0.60/W	Yes (may reduce ITC basis)	$500-$3,000
SRECs	NJ SRECs ~$200/MWh	Yes	$500-$2,000/year
Net Metering	1:1 retail rate credit	Yes	Ongoing bill savings
Property Tax Exemption	TX 100% exemption	Yes	Varies by home value

For a detailed breakdown of net metering policies, see our Net Metering by State guide.

Is the Solar Tax Credit Worth It?

For most homeowners, the answer is a clear yes. Consider a typical scenario:

System cost: $18,000 (6 kW system)
Federal ITC (30%): -$5,400
Net cost: $12,600
Annual electricity savings: $1,500 to $2,000
Payback period: 6 to 8 years
System lifespan: 25+ years

After the payback period, your solar panels essentially generate free electricity for another 17 or more years. Use our solar calculator to estimate your specific savings based on your location, roof, and energy usage.

For a full breakdown of current pricing, see our Solar Panel Costs in the USA 2026 guide.