Solar Tax Credits and Incentives for Homeowners (2023 Guide)

Learn more about solar tax credits and how they can save you money on solar installation.

Florida homeowners are installing solar, reaping the benefits and incentives they bring. Some may consider solar panels cost-prohibitive, but incentives, tax credits, and financing can help to make them more affordable. Investing in solar panels can lower your electricity bills, increase the value of your home, and reduce your dependence on your local utility provider.

 Tax credits include the federal solar tax credit or investment tax credit (ITC). Since the passage of the Inflation Reduction Act, solar energy will be front and center in the electricity supply. The bill includes over $300 billion in funds for renewable technology and climate measures with an extension of the Solar ITC at 30% for photovoltaic systems (PV) and battery storage products that are charged with renewable energy. Install solar energy equipment in your home through 2032, and you will enjoy the nonrefundable credit off of your federal income taxes with no dollar limit.

Inflation Reduction Act –
How it impacts you as a homeowner

From 2005 to 2012, a federal tax credit for solar energy was available. The rates of this credit have fluctuated in recent years, and homeowners are now receiving the highest they have ever received due to the Inflation Reduction Act. As a part of the legislation, The Residential Clean Energy Credit allows you to subtract 30% of the installation cost from your federal taxes.

ITC will be reduced to 26% in 2033 and 22% in 2034. Under the act, solar photovoltaic (PV) panels, PV cells, contractor labor, permitting and developer fees, inspection costs, storage batteries, sales tax, and any equipment required to run the solar system.

What is a tax credit?

A tax credit is a dollar-for-dollar reduction in the amount of income tax you owe. If you should claim a $1K federal tax credit, this reduces the amount of federal income taxes you owe by the same amount. Also called an Investment Tax Credit (ITC), it is different from the ITC available for businesses that install solar systems. 

The federal solar tax credit is specifically claimed on your federal income taxes for a percentage of the cost paid for your solar PV installed during that tax year with no maximum amount limit.

Solar energy systems eligibility

You are eligible to claim the federal solar tax credit if you meet these conditions: 

• Your solar PV system was installed between January 1, 2017, and December 31, 2032.
• The solar PV system is located at your residence in the United States.
• You purchased an interest in an off-site community solar project if the generated electricity is credited against and doesn’t exceed your home’s electricity consumption. 
• If you own your solar PV system, you could have purchased it with cash or through financing, but it must not be leased or be paying a solar company to purchase the electricity generated by the system. 
• The solar PV system is new or being used for the first time, as the credit can only be claimed on the original installation of the equipment.

Solar panel rebates

There are several rebates available, including: 

Sales Tax Exemption

In addition to a 100% property tax exemption for residential solar panels, Florida law also exempts renewable energy from its sales and use taxes. According to the Department of Revenue (DOR), this means that you won’t have to pay any extra charges on your electricity bill when it comes time to file income tax returns!

The law applies only if all equipment used in generating clean sustainable power has been certified as qualified by FLETC – which includes things like inverters or mounting hardware along with electrical components such as disconnect switches & wiring needed so they can work properly.

Federal Tax credits and incentives

Florida homeowners receive a 30% Federal Tax Credit to recoup funds paid for their equipment and installation costs. So, if you are in Florida there are viable options to help mitigate the costs of investing in solar.

Credits and Incentives for commercial solar

Florida businesses can save dramatically on energy costs. Utility bills can represent 30% of the operating cost for most companies. Take advantage of these incentives to make your solar installation even more affordable. Integrating commercial solar power systems into your energy strategy can help you reduce your energy expenses.

For those businesses looking to own a solar system, a cash purchase can offer a high ROI and allow you to take advantage of the Federal Investment Tax Credit, with qualifying systems available at nearly 60% cost savings.

 The incentives are there for business owners who are aiming toward solar energy. Through the MACRS Modified Accelerated Cost Recovery System, businesses can reduce taxes and increase the return on investment of solar power by reducing the operating overhead from peak energy costs. Qualified solar power systems have a five-year cost recovery period. Accelerated devaluation can lower net costs by 30%. Several states offer their own MACRS tax benefits to business owners who buy solar power, which could lower your tax burden and reduce your repayment term.

Questions about Solar Tax Credits

How Much is the Solar Tax Credit for 2023?

The ITC provides a tax credit of 30% of the total cost of your solar panel system. The program is extended for another 10 years at 30% with additional credits at a reduced rate through 2032.

Can you Claim Solar Panels on Your Taxes Every Year?

You can only claim the installation of solar panels on your federal income taxes once.

What is the Best Way to Claim Solar Tax Credits?

After your solar power installation:

1. File IRS Form 5695 with your tax return. You can carry over any unused amount remaining on your tax credit that couldn’t’ be claimed in a single tax year.
2. Include the documentation your solar provider supplies to you.
3. On Part 1 of Form 5695, calculate your credit and file your solar system as “qualified solar electric property costs.”
4. Consult with your tax expert to ensure you are correctly claiming the ITC. If you used a finance company, be sure that you are also providing supporting documentation.

Please note that this is not tax advice, please speak with a tax advisor for the most accurate advice per your situation.

Are Free Solar Panel Programs Legit?

Free solar panels don’t exist; this is usually a solar lease or solar power purchase agreement (PPA). The solar company will install solar panels for nothing up front but will then charge you for the generated electricity. A $0-down solar loan is better as you receive federal, state, and local incentives.

Are There Solar Financing Options Available?

Yes! Solar and Battery Energy storage financing solutions are available for every budget. SEM Power offers residential solar loans through lending partners Dividend and Climate First Bank.

How Long Does it Take Solar Panels to Pay For Themselves?

Solar systems will pay for themselves over time through electricity savings and incentives. On average, it takes from five to ten years, depending on your state.

Partner with SEM Power Today to Leverage Incentives and Rebates for Solar Energy

SEM delivers clean solar energy systems that reduce energy costs for Florida homes, businesses, and communities. Our best-in-class solar panel technology and experienced solar service experts can help you save and enjoy clean, renewable solar energy.