The investment tax credit (ITC), also known as the federal solar tax credit, allows you to deduct 26 percent of the cost of installing a solar energy system from your federal taxes. The ITC applies to both residential and commercial systems, and there is no cap on its value.

How do I calculate my solar tax credit?

For businesses installing commercial solar projects, the rebate is calculated on the gross installed cost of the solar system; i.e., before deducting for any local or utility rebates. So, using the same example: 26% x $15,000 = $3,900 solar tax credit that your business can use toward federal income taxes.

What is the federal tax credit for solar?

• The solar investment tax credit (ITC) is a tax credit that can be claimed on federal corporate income taxes for 30% of the cost of a solar photovoltaic (PV) system that is placed in service during the tax year.1(Other types of renewable energy are also eligible for the ITC but are beyond the scope of this guidance.)

Do you have to pay taxes on solar panels?

Basically, this means if you owe income taxes during the same year of your installation, and you are the owner of the solar panels you qualify for the tax credit. Keep in mind, you can’t take a credit larger than the amount of taxes you owe, because the ITC is a “non-refundable” tax credit.

Is the solar PV rebate considered taxable income?

Under most circumstances, solar PV system rebates provided by a utility or state government are considered taxable income and do not affect the tax basis when calculating the ITC.

How is the federal investment tax credit calculated?

Eligible Expenses The ITC is calculated by multiplying the applicable tax credit percentage (10%–30%) by the “tax basis,” which is the amount invested in eligible property. Eligible property includes the following: • Solar PV panels, inverters, racking, balance-of-system equipment, and sales and use taxes on the equipment