How to Claim the Solar Tax Credit in 2023
Disclaimer: This material is for informational purposes only. It is subject to change and should not be relied upon for tax advice. We always recommend speaking with a tax professional before making tax-related decisions.
If you’re planning to install residential solar panels in 2023, you don’t want to miss out on the federal solar tax credit. The solar tax credit is a dollar-for-dollar credit that reduces your federal tax liability by 30% of your solar installation costs.
You don’t have to apply for the tax credit, you just have to add the solar tax credit to your tax return when you file. It’s a relatively simple process, and we’ve put together a step-by-step guide to walk you through it.
Grid-Tied Solar Panels Shut Down During a Power Outage
Most residential solar energy systems are tied to the electric grid, which allows electricity to flow from the grid to the home and from the home to the grid. The bi-directional flow of electricity is how net metering works, but during a power outage, it creates a safety hazard. An unexpected surge of power coming into the grid from your solar system could injure utility workers and damage equipment. To prevent injury and damage, all grid-tied solar panel systems are automatically shut down during a blackout.
Step-by-Step Guide to Claiming the Solar Tax Credit in 2023
The solar tax credit will be available until 2035 (although it will be reduced in value starting in 2033). To claim the tax credit on your 2023 tax return, you will need to complete your solar installation and turn your system on no later than December 31, 2023.
Step One: Save Your Receipts
To claim your tax credit, you will need to add up all costs associated with your solar installation so you can calculate the correct credit amount. This will be easiest if you save your receipts and have them on hand when filing your taxes.
The solar tax credit covers almost every aspect of your solar installation, including:
- Materials (Solar panels, solar batteries, inverters, wiring, racking systems)
- Labor costs for site preparation, assembly, and installation
- Permitting and inspection fees
Step Two: Complete IRS Form 5695
When you file your taxes, you will need to complete IRS Form 5695. You’ll use this form to calculate your tax credit amount. Instructions for completing the IRS solar tax credit Form 5695 can be found here.
Step Three: Add Your Tax Credit Information to Form 1040
Finally, add your credit information to your typical IRS Form 1040/Schedule 3. Remember to attach Form 5695 when you file your tax return.
How Many Times Can You Claim the Solar Tax Credit?
The solar tax credit is a one-time credit. You can only claim it for the initial installation of your solar panel system. If the credit you receive is worth more than what you owe in taxes, you will be able to roll the remainder over into the following year.
Save on Your Arizona Solar Installation with the Solar Tax Credit
SouthFace Solar & Electric is the leading solar installation company in Arizona, specializing in rooftop and off-grid solar. We can help you take advantage of solar incentives like the federal solar tax credit to reduce your solar installation costs and help you go solar faster. Check out our FAQs to learn more about how the solar tax credit works and for answers to all your questions about switching to solar.
