At the end of 2022, The North American Electric Reliability Corporation (NERC) issued a stark warning: As tax season approaches, solar owners and those considering going solar have an opportunity to maximize their savings. One of the biggest financial incentives for installing solar panels is the federal solar tax credit, but with a new administration, its future is uncertain. Here’s what you need to know to make the most of your solar investment while you still can.
Understanding the Federal Solar Tax Credit
The Investment Tax Credit (ITC) allows homeowners to deduct 30% of the cost of a solar energy system from their federal taxes. This incentive significantly reduces the upfront cost of solar, making it a key driver in the adoption of renewable energy. However, with potential policy changes on the horizon, the ITC could be reduced or eliminated, making 2025 a critical year to take advantage of the savings while they last.
How solar owners can maximize their tax benefits
If you installed solar panels in 2024, you’ll want to make sure you properly claim your 30% tax credit when filing your return. Here are a few steps to ensure you receive the full benefit:
- Gather your documentation: Keep a record of all receipts and invoices related to your solar panel installation, including labor, equipment, and permitting costs.
- File IRS form 5695: This form is used to claim the Residential Energy Credit. The total credit amount will be applied to reduce your tax liability.
- Understand carryover benefits: If your tax credit is larger than what you owe, you can roll over the remaining amount into future tax years.
- Check for additional state incentives: Many states offer rebates, tax credits, or performance-based incentives that further reduce the cost of your solar installation.
Planning ahead: what if the solar tax credit goes away?
While the ITC remains available now, future changes could make solar less financially appealing. If you’re considering solar, acting soon can help you secure the highest possible incentive before any reductions take effect. Installing a system now ensures you maximize savings and lock in financial benefits while they are still in place.
Beyond the ITC, battery storage incentives are another way to increase your savings. Some states offer separate tax credits or rebates for adding a home battery system, which can provide backup power and further optimize your solar investment. Additionally, exploring net metering programs in your area can help you lower your monthly utility bills. Many states allow homeowners to earn credits for excess solar energy sent back to the grid, increasing long-term savings.
By taking proactive steps now, you can make the most of available incentives and position yourself for greater energy savings in the years ahead.
Solar pays off beyond tax savings
Even if federal incentives change, the long-term financial benefits of solar remain. Homeowners who go solar can expect far lower energy bills. In fact, a typical U.S. household with solar saves between $31,000 and $100,000 over the system’s lifetime. In addition, you can expect an increase in the value of your home and enjoy the energy independence that comes with generating your own electricity—protecting yourself from rising electricity rates and potential grid instability.
With tax season approaching and the future of solar incentives uncertain, now is the time to make the most of available credits. Whether you’re a current solar owner or thinking about making the switch, acting now can lead to substantial savings. Talk to a tax professional or your solar provider to ensure you’re maximizing your benefits while they last.
Thinking about going solar? Don’t wait—lock in your savings before potential changes take effect.
