Mar. 17, 2023
*DISCLAIMER: While this blog post discusses solar tax credits, you should ALWAYS consult your tax professional for your specific situation. We do not assume responsibility for your tax situation or credits.
The federal solar tax credit, also known as the Investment Tax Credit (ITC), is one of the best solar incentives available for Massachusetts solar installations. The solar panel tax credit reduces your federal tax liability by 30% of your solar installation costs. For most residential solar installations, the solar tax credit leads to thousands of dollars in savings!
It’s possible that your credit will be worth more than what you owe when you file your tax return. If that’s the case, you can roll over the remaining balance into the following year. You can continue to roll over unused portions of your credit for as long as the solar tax credit is in effect.
The federal tax credit for solar panels will be in effect until 2034, although it will be reduced to 26% in 2033 and 22% in 2034.
Federal Solar Tax Credit Rollover: How it Works
The federal solar tax credit works by reducing what you owe in federal income tax by 30% of your solar installation costs.
To illustrate, let’s say you spend $30,000 to install a solar energy system. Thirty percent of $30,000 is $9,000, which means you would receive a $9,000 tax credit.
Now, let’s say you owe $8,000 in federal taxes. Your credit covers the entire amount, bringing your tax liability down to zero. But you haven’t used the full credit—there is still $1,000 remaining. You’ll be able to save the remaining $1,000 credit and apply it to your taxes in the following year.
You can continue to carry forward your remaining balance until you’ve used the entire amount, for as long as the solar tax credit is in effect.
Can You Claim the Solar Tax Credit if You Don’t Owe Taxes?
The solar tax credit needs to be claimed for the year your solar installation was completed. If you complete your solar installation in 2023, for example, you will claim the credit on your 2023 tax return.
If you don’t owe taxes the year you claim your credit, you will not receive the credit in that year. You can, however, carry any unused amount forward. So, if you have tax liability the following year, you may still be able to claim the credit.
How Many Times Can You Claim the Solar Tax Credit?
In most cases, you can only claim the residential solar tax credit one time. There are, however, a few exceptions.
- If you own multiple properties, such as a primary residence and a vacation home, and you install solar panels on both, you can claim the credit for both projects.
- If you claimed the solar tax credit on a previous solar installation and it’s time to replace the system, you can claim another credit on the new installation.
Don’t Miss Out on Tax Savings—Go Solar Now!
The longer you wait to go solar, the longer you have to wait to claim your tax credit. Boston Solar can help you take advantage of the solar tax credit in 2023. We are the leading solar installation company in Massachusetts with over 10 years of experience serving local homeowners. We’ve installed more than 5,000 solar panel systems, and we know what works best for Massachusetts homes.
Our expert team is here to answer your questions aboutsolar incentives in Massachusetts and help you save as much as possible on your solar installation.
Save big on solar with the 30% federal solar tax credit! Call 617-858-1645 or contact us to schedule a free consultation.
FAQs
How many years can I roll over my solar tax credit? You can carry forward your solar tax credit for as many years as you need until 2034, which is when the ITC is scheduled to expire. If you don't have any tax liability this year, and you don't think you'll have any again next year, you can still rest easy.
How does IRS verify solar tax credit? ›
In conclusion, the IRS verifies solar credits through thorough documentation. Homeowners need to keep receipts and manufacturer certifications for their solar technology installation. The verification process may also involve cross-referencing with approved industry standards.
Is there a cap on the solar tax credit? ›
The federal residential solar tax credit is the most valuable incentive you can claim this year because it saves you thousands of dollars in the form of a 30% tax credit. There's no limit to the amount you can claim.
Can a tax credit be carried forward? ›
A carryforward credit is the application of a tax credit to a future tax year. This provision exists so that businesses can take advantage of tax credits that were unused because of operating losses or IRS imposed limits on how much can be claimed in a single year.
What if I forgot to claim my solar tax credit? ›
Will the 30% solar tax credit be retroactive? The solar tax credit was 30% for 2022 and 2023, so if you forgot to claim the credit on your 2022 taxes, you can amend them and retroactively apply it to solar PV systems installed in 2022.
How many years do I have to use my solar tax credit? ›
The credit has no annual or lifetime dollar limit except for credit limits for fuel cell property. You can claim the annual credit every year that you install eligible property until the credit begins to phase out in 2033.
What disqualifies you from solar tax credit? ›
You will not get the tax credit if your solar panels are installed through a solar lease or a power purchase agreement (PPA) because you are not the owner of the system. You must have taxable income.
How to carry over solar tax credit? ›
The solar tax credit is a nonrefundable tax credit, so you need to have tax liability for the year you want to use it. If you don't have a tax bill for the current year, you simply have to wait to carry it over until the next year in which you do owe taxes.
How many years can you carry forward residential energy credit? ›
There is no lifetime limit for either credit; the limits for the credits are determined on a yearly basis. For example, beginning in 2023, a taxpayer can claim the maximum Energy Efficient Home Improvement Credit allowed every year that eligible improvements are made.
Do I get the solar tax credit back in a refund? ›
When you purchase solar equipment for your home and have tax liability, you generally can claim a solar tax credit to lower your tax bill. The Residential Clean Energy Credit is non-refundable meaning that it can offset your income tax liability dollar-for-dollar, but any excess credit won't be refunded.
Under section 46(b)(1), unused credit may be carried back and carried over. Carrybacks and carryovers of unused credit are taken into account in determining the amount of credit available and the credit allowed for the taxable years to which they may be carried.
How many years can tax credits be carried forward? ›
State Carryforward Rules
Many states also allow unused R&D Tax Credits to be carried forward. Some mirror the federal carryforward guidelines of 20 years while others range anywhere from zero to eternity. In California, for example, there is currently no limit on the carryforward period.
What are the rules for carryover of tax credits? ›
In general, no part of the unused credit for any year attributable to any credit can be carried back to any tax year before the first tax year for which that credit was first allowable. However, this general rule does not apply to unused credits listed in section 6417(b), which may be carried back 3 tax years.
What happens if you don't owe taxes on solar tax credit? ›
Can I use the federal solar tax credit if I do not owe any taxes? No. You can only use the solar tax credit to reduce your federal tax liability. If you don't owe federal taxes, you cannot redeem the tax credit in cash.
Why am I not getting the full solar tax credit? ›
If you are leasing solar panels, you don't get the tax break. There is no maximum amount that can be claimed, though. In addition, if you financed the system through the manufacturer and are contractually obligated to pay for it in full, you can claim the credit based on the full cost of the system.
Can you sell your solar tax credit? ›
The tax credits must be exchanged for cash with an unrelated party. The cash received will be treated as tax-exempt income. The cash paid by the buyer is a nondeductible expense. The credits can only be sold once, so it's important to understand the impacts before arranging a sale.
Do you need receipt for solar tax credit? ›
To claim the solar tax credit, you'll need all the receipts from your solar installation, as well as IRS form 1040 and form 5695 and instructions for both of those forms.
Do you get a check for federal solar tax credit? ›
No, the Solar Tax Credit Program Doesn't Issue You a Refund Check. Let's say your installation costs for a rooftop photovoltaic system total $24,000. By claiming the 30 percent solar ITC, will you get a big, fat refund check in the mail for $7,200? Unfortunately, no.
How does your solar tax credit work if your receiving money in tax? ›
It's not a tax refund. Instead, it reduces the amount of money you owe in taxes as a credit. There is no maximum to the amount you can claim and it can be applied to most installation costs for a solar PV system. The 30% rate will remain until 2032.
