How the Federal 30% Solar Tax Credit Works in 2026
The federal Investment Tax Credit (ITC) is worth 30% of your total solar installation cost — and it remains the single most impactful financial incentive available to homeowners going solar in 2026. Here's exactly how it works.
What Is the Solar Investment Tax Credit?
The ITC is a federal income tax credit equal to 30% of the total cost of your solar system, including installation labor, equipment, permitting, and wiring. It's not a rebate — it directly reduces the amount of income tax you owe dollar for dollar.
Passed as part of the Inflation Reduction Act of 2022, the 30% rate is locked in through 2032. It steps down to 26% in 2033, then 22% in 2034, and expires for residential installations in 2035 unless Congress extends it again.
How Much Is the Credit Worth?
On an average 6kW residential system costing around $18,000, a 30% ITC equals $5,400 off your federal tax bill. That's significant — roughly equivalent to getting the first year and a half of electricity savings up front.
See actual cost and savings data for your state:
- Solar ROI in California — strong irradiance, high electricity rates
- Solar ROI in Texas — largest residential solar market in the US
- Solar ROI in Florida — year-round sun, net metering incentives
- Solar ROI in New York — state adds 25% credit on top of federal
- Solar ROI in Arizona — some of the best irradiance in the country
Who Qualifies?
You qualify for the ITC if you:
- Own (not lease) the solar system. Lease agreements transfer the credit to the leasing company.
- Install it on a US primary or secondary residence, or a commercial property.
- Owe federal income tax. The credit can't drop your liability below zero — but unused credit carries forward to future tax years.
Renters cannot claim the credit. If you finance through a loan (not a lease), you still own the system and can claim it.
How to Claim It
Claiming the ITC is straightforward:
- Install and pay for a qualified solar system in the tax year.
- File IRS Form 5695 ("Residential Energy Credits") with your tax return.
- Enter 30% of your net system cost on Part I, line 6b.
- The credit flows to Schedule 3, then to your Form 1040.
Keep all receipts, invoices, and installer contracts. The IRS may ask for documentation.
State Incentives That Stack With the ITC
Many states offer additional credits that layer on top of the federal 30%. Some notable ones:
- New York: 25% state tax credit (up to $5,000) in addition to the federal credit.
- Massachusetts: 15% state credit (up to $1,000).
- South Carolina: 25% state credit with no cap.
- Montana: $500 state tax credit.
- Maryland: $1,000 clean energy grant plus an exemption from the sales tax on solar equipment.
Use our solar ROI calculator to see state-specific payback periods after combining federal and state incentives.
Battery Storage Also Qualifies
Since 2023, standalone battery storage systems qualify for the 30% ITC even without solar panels attached. If you add a home battery like a Tesla Powerwall or Enphase IQ Battery alongside your solar installation, the full combined cost qualifies for the credit.
The Bottom Line
The 30% ITC is genuinely valuable — it meaningfully shortens payback periods across all 50 states. The best time to go solar under the current rules is before 2033, when the rate steps down. If you're on the fence, the financial case is strongest right now.
Check our data to see how solar ROI stacks up in your state, or use the interactive calculator to model your specific situation.