How much is the federal solar tax credit worth?

As of this writing, the federal residential solar tax credit is commonly cited at 30% of your total system cost, with no maximum cap for most residential installations. Tax credit rules and rates can change through legislation, so confirm the current rate and eligibility with a tax professional or the IRS before filing.

Do I get the tax credit if I lease my solar panels?

No. Only the owner of the system can claim the federal tax credit. If you lease your system or use a power purchase agreement (PPA), the leasing company owns the system and claims the credit itself — see our financing comparison for how this affects your overall savings.

What if my tax liability is smaller than my credit amount?

The federal solar tax credit is generally structured to allow unused credit to roll forward to future tax years if you don't owe enough in the credit year to use it all at once. Confirm the specific rollover rules that apply to your filing with a tax professional, since this is a tax matter that depends on your individual situation.

The Federal Solar Tax Credit Explained (2026)

The federal solar tax credit is the single biggest incentive most homeowners qualify for — and one of the most misunderstood. Here’s how it actually works.

This article is educational, not tax advice. Tax credit rules can change, and how they apply to you depends on your specific tax situation — always confirm current details with a qualified tax professional before filing.

What the credit is

The federal solar tax credit — officially the Residential Clean Energy Credit, often still called the ITC (Investment Tax Credit) from its commercial-sector name — lets eligible homeowners claim a percentage of their total solar system cost as a credit against their federal income taxes. As of this writing, that percentage is commonly cited at 30% for qualifying residential systems, with no dollar cap for most homeowners.

Who qualifies

Generally, you need to:

Own your solar system — outright with cash, or via a solar loan. Leases and PPAs don’t qualify you for the credit, since the leasing company owns the equipment.
Have the system installed at a U.S. residence you own — primary or secondary homes typically qualify; rental properties you don’t live in generally follow different rules.
Have enough federal tax liability to use the credit, though unused amounts generally can carry forward — confirm current rollover rules with a tax professional.

What costs are included

The credit is typically calculated on the total cost of the system, which commonly includes:

Solar panels and inverters
Racking and mounting hardware
Labor for installation
Wiring and electrical work directly tied to the system
Battery storage, in many cases, if installed alongside or added to a solar system

Confirm with your tax preparer exactly what your specific installer’s invoice breakdown supports claiming.

How to claim it

Keep your final invoice showing the total system cost from your installer.
File IRS Form 5695 (Residential Energy Credits) with your federal tax return for the year the system was placed in service.
Carry the calculated credit to your Form 1040.
Work with a tax professional if your situation involves multiple properties, business use of your home, or other complicating factors.

Common mistakes homeowners make

Assuming the credit reduces the price at the time of purchase. It doesn’t — you pay full price (or finance it) and then claim the credit on your tax return, so make sure your cash flow plan accounts for that timing gap.
Leasing and expecting to claim the credit. As covered above, only owners qualify.
Forgetting to include eligible costs like battery storage or electrical upgrades tied directly to the solar installation.
Not confirming current rules before filing, since tax credit programs can be modified by legislation — this article reflects general, commonly cited terms as of publication, not a guarantee of what applies in your filing year.

How this affects your real cost

The tax credit is why most cost comparisons on this site, including our calculator, show both a pre-credit and post-credit price — a $21,000 system effectively costs roughly $14,700 after a 30% credit, which materially changes your payback period. Combine it with any state-level incentives you qualify for to get your true net cost.

Bottom line

The federal solar tax credit is one of the most valuable incentives available to homeowners going solar, but it only applies if you own the system and file the right paperwork. Confirm current rules and your specific eligibility with a tax professional before you rely on this credit in your budgeting.