What is the federal solar tax credit?

The federal solar tax credit is formally known as the Investment Tax Credit (ITC). This allows tax-paying homeowners to claim 26% of their solar system’s cost as a deduction on their income taxes. It is essentially a 26% discount on your solar system. If your tax liability is less than 26% of your solar system’s cost, then you can roll the remaining balance over to the next period for up to 10 years.

It is expected that the rate of 26%, in 2021, will be declining in the years to come. It was at 30% in 2019 and as the window of opportunity closes to go solar, these incentives will most likely go away, as well.

However, on December 27, 2020, President Trump signed the federal spending package and COVID-19 relief spending bill that officially extended the 26% Solar ITC through 2021 and 2022. The solar ITC, which was scheduled to drop from 26% to 22% in 2021, will stay at 26% for two more years!