Disclaimer: This guide is for informational purposes only and should not be relied on for tax or financial advice. We always recommend that you consult your tax advisor for information regarding your specific situation.
If you’re thinking about installing residential solar panels and battery backup, you don’t want to miss out on the federal solar tax credit. The solar tax credit is one of the best solar incentives in 2023 and can significantly reduce your upfront solar panel installation costs.
Tax credits can be confusing, but don’t worry—our solar experts are here to help. Claiming the solar tax credit in 2023 is simple, and we’ve put together a step-by-step guide to help you navigate the process.
What Is the Federal Solar Tax Credit?
The solar tax credit is an existing federal solar incentive that has been in place for many years. It is a dollar-for-dollar credit that reduces your federal tax liability by a percentage of your solar installation costs.
The Inflation Reduction Act of 2022 (IRA) expanded the solar tax credit and increased its value. In 2023, the solar tax credit is worth 30% of your total solar panel and battery installation costs. The 30% solar tax credit will be available for solar installations that are completed between 2022 and 2032.
How to Claim the Federal Solar Tax Credit in 2023
To claim the residential solar tax credit on your 2023 taxes, your solar panel system needs to be up and running by the last day of the year—December 31, 2023. If your installation is complete and your system is turned on by that date, you can claim the credit in 2023.
You don’t need to apply for the solar tax credit. To claim it, follow these steps:
Step One: Save Your Receipts
To claim the solar tax credit, you will need to add up all costs associated with your solar installation. Saving your receipts will help you keep track of costs so you can get the highest credit possible. Having your receipts on hand will also make it easier to verify your expenses with the IRS.
Step Two: Complete IRS Form 5695
When you file your taxes, you’ll need to complete IRS Form 5695 to calculate how much your solar tax credit is worth.
Step Three: Add Your Credit Information to IRS Form 1040
Next, add the tax credit information you calculated on Form 5695 to line 5 of your typical IRS Form 1040/Schedule Three.
Step Four: Attach Form 5695 to Your 2023 Tax Return
The final step is to attach Form 5695 when you file your taxes.
Maximize Your Solar Savings with the Federal Tax Credit
The Inflation Reduction Act’s solar panel tax credit makes solar an even more attractive investment for California homeowners—it reduces your upfront costs and speeds up your ROI. Premo Solar can help you take advantage of California solar rebates and tax incentives like the solar tax credit. We are a leading solar installer near you offering premium solar installations throughout the Monterey Bay area. Our expert team can help you maximize your solar benefits with a customized system designed around your needs.