What is the Solar Tax Credit

The Investment tax credit (ITC) for solar power, also known as the federal solar tax credit is a US federal government strategy, originally established by the Energy Policy Act of 2005. This sovereign strategy allows a consumer to deduct 30 percent of the cost of installing a solar energy system from their federal taxes. There is no cap to the value of the system installed, and this subsidy applies to both residential and commercial solar system installations. Initially started in 2005, this scheme has now left its footprints in the US ideology of making renewable energy the primary source of power for homes and industries. Due to the wide acclamation that the Solar Tax Credits brought around the US, the government did an extension in its tenure till 2021. This Solar Tax Credits scheme was actually introduced in support of the United States’ action of transition to a renewable energy economy.

History and Opportunity of the Federal Solar Tax Credit

Like already mentioned, this government-aided scheme commenced in 2005, and was about to get over by 2007 but given by its productive and popular nature, Congress passed a multi-year extension of the ITC in 2015. For the present, the extension is till 2021. Let us have a look at the statistics of results that it brought:

1. There is a 54% average annual solar growth since the ITC was enacted.

2. The residential and commercial solar ITC has helped the US solar energy industry grow by more than 5,000 percent since its implementation.

3. The 2015 extension of the ITC to 2021, has validated companies to develop long-term investments that drive competition and technological innovation, which in turn has lowered energy costs for consumers.

4. The long-term stability of this federal policy has also allowed businesses to continue driving down costs. The ITC is a clear policy success story – one that has resulted in a stronger and cleaner economy.

5. The federal solar tax credit is accredited, not a deduction, off total tax paid.


* We are not licensed tax professional and highly recommend that you consult with a tax professional.

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