Guide To The Investment Tax Credit (ITC)
By: Jess Hans
Sep 7th 2022
This is a reduction of federal income taxes you would otherwise owe as a result of investing in a Residential Solar System. The system must be in service (aka a completed installation) during the tax year in which you’re applying for the ITC, and to be generating electricity for a home in the United States.
You can calculate your ITC by multiplying the net capital investment amount for that year by the investment tax credit percentage. The ITC percentage varies based on the year of completed install.
Currently, there is a 26% tax credit for systems installed in 2020-2022, and a 22% tax credit for systems installed in 2023. This expires in 2024 pending a Congressional renewal of the tax credit.
Eligibility for ITC requires that your system was installed between 1/1/2006-12/31/2023, is located at your primary or secondary residence or located at an off-site community solar project, and that the electricity generated does not exceed your home’s electricity consumption. You must also own the system, and it must be new or being used for the first time.
Expenses include panels and cells used to power an attic fan, contractor labor costs for preparation, assembly, installation (this includes permits, inspections & developer fees), wiring & mounting equipment, and energy storage devices being charged by said panels.