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Guide to the Federal Solar Tax Credit for Washington State Homeowners

Disclaimer: This guide provides an overview of the residential solar tax credit for informational purposes only. It does not constitute professional tax advice or financial guidance and is subject to change. You should always consult a professional tax advisor when making purchasing, investment, and tax-related decisions.

Going solar is an investment, but there are ways to save on your installation! 

The solar tax credit is an incentive that reduces your federal income tax liability by 30% of your solar installation costs. It’s one of the best solar incentives available to Washington State residents and makes residential solar panels significantly more affordable for homeowners. 

Keep reading to learn everything you need to know about the solar tax credit in 2024.

What Is the Federal Solar Tax Credit?

The solar tax credit is a federal incentive designed to encourage solar energy adoption. It reduces the amount of federal income tax you owe for the year you install your solar energy system by a percentage of your total costs—currently 30%. There is no maximum amount that can be claimed and, if your credit is worth more than you owe in taxes for that year, you can roll the remainder over to the following year. 

The solar tax credit goes by many names. It’s formally known as the Residential Clean Energy Credit but is more commonly referred to as the solar tax credit or solar panel tax credit. You may also hear it referred to as the Investment Tax Credit (ITC) or the Inflation Reduction Act solar tax credit. 

How Does the Solar Tax Credit Work?

The solar tax credit is a credit, not a deduction or a rebate. It works by reducing your federal income tax liability by a percentage of your solar installation costs. The solar tax credit is currently worth 30% of your solar installation costs. It will remain at this rate for systems installed through 2032. It will be reduced to 26% for systems installed in 2033 and 22% for systems installed in 2034 before expiring in 2035.

Who Is Eligible for the Residential Solar Tax Credit?

Almost all residential solar installations qualify for the solar tax credit. To be eligible, you must:

  • Install your solar energy system at a home you own in the United States
  • Own your solar energy system (leased systems do not qualify, but financed systems do)
  • Install solar equipment that is new or being used for the first time
  • Have taxable income

If you meet these qualifications, you can claim the solar tax credit.

What Expenses are Eligible for the Solar Tax Credit?

Virtually all the expenses associated with a home solar installation are eligible for the solar tax credit, including: 

  • Solar photovoltaic (PV) panels 
  • Energy storage devices (batteries)
  • Wiring, inverters, and mounting equipment 
  • Installation costs 
  • Permitting and inspection fees

How to Claim the Solar Tax Credit

The first step toward claiming the solar panel tax credit is to consult a tax professional and confirm your eligibility. Then, simply complete IRS Form 5695 and add your tax credit information to your IRS Form 1040. Remember to attach Form 5695 when you file your tax return! It’s helpful to keep all receipts associated with your solar installation to ensure you file accurately and receive the highest possible credit. 

Your solar installation must be completed and your system turned on before the end of the year for which you claim the tax credit. If, for example, you want to claim the tax credit in 2024, your solar energy system must be up and running by December 31, 2024, at the very latest.

Start Your Solar Installation Today

Cascadia Solar is a local solar company that’s been installing solar panels on the Olympic and Kitsap Peninsulas since 2008. As the solar division of Frederickson Electric, we have over 50 years of experience serving the community and are committed to helping our customers make the best decisions for their homes. Our team is here to talk to you about your solar incentive and financing options, guide you through the process, and help you decide whether solar makes sense for you.

Save 30% on solar with the federal solar tax credit! Call 360-531-6163 or contact us for your free, no-obligation consultation and estimate.