As you begin the search for the perfect solar system, you may hear people talking about the Federal Tax Credit. This is also referred to as the Investment Tax Credit or Income Tax Credit (ITC). This tax credit is one of many incentives currently offered to homeowners who go solar! But what exactly is the Federal Tax Credit?

What Is It?

One of the most environmentally friendly things happening these days is homeowners making the switch to renewable energy. The federal government realized that one of the best ways to encourage homeowners to make a switch is to provide incentives. The ITC, for example, is a simple way to reward homeowners financially who go solar. The current ITC rewards homeowners who go solar by giving them back 30% of the cost of their solar purchase.

So, if your solar system costs $20,000, the Federal Government will give you $6,000 in the form of a tax credit. After the tax credit has been applied, your net cost of the system is only $14,000.


The Federal Tax Credit is one of the best incentives for many reasons: Not only for the sheer amount but because anyone who owns their solar panels and pays taxes is eligible! For those who are thinking about leasing, you can kiss the ITC goodbye. In fact, the solar company who installed the system will receive the tax credit.


Previously, we mentioned that the Federal Tax Credit was referred to as either the Income Tax Credit or Investment Tax Credit. The reason for the two different names is simple. The Income Tax Credit refers to homeowners who are benefiting from their income taxes.

A business going solar and taking advantage of the tax credit will receive an Investment Tax Credit. Even though the name is different, the amount is the same for both homeowners and business owners.

Changes To The ITC

As we mentioned before, the ITC is the biggest solar incentive offered right now but it will soon change. In 2015 the Federal Government agreed to extend the ITC for another 5 years. Unfortunately, those years have come and are about to go. The ITC will be decreasing at the end of 2019, from 30% to 26% and will continue to drop until 2022, where it will remain at 10%.

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