Tax Incentives & Benefits

Tax Incentives

What is the Federal Solar Tax Credit?

The solar Investment Tax Credit is a credit you claim on your federal income taxes. The ITC is not a tax deduction. Instead, it reduces what you owe in taxes. This credit applies to the costs associated with installing a solar photovoltaic (PV) system in that tax year. There is not maximum amount that you can claim from your solar project.

How does the tax credit work?

You can claim the Federal solar tax credit as long as you are a U.S. homeowner and own your solar panel system. You can claim the credit once; it will roll over to the next year if the taxes you owe are less than the credit you earn.

How do I claim the Federal Solar Tax Credit?

You claim the solar tax credit as part of your annual federal tax return with the Internal Revenue Service (IRS) using form 5695. We recommend that taxpayers consult with a tax expert and your solar provider to ensure you are claiming the ITC correctly.

What does the Federal Solar Tax Credit cover?

According to the Office of EERE (Energy Efficiency and Renewable Energy), the Federal Solar Tax Credit covers the following items:

  • Panels - The credit covers solar PV panels or PV solar cells.

  • Additional Equipment - The credit covers other solar system components including the balance-of-system equipment and wiring, inverters, and other mounting equipment.

  • Batteries - The ITC covers storage devices, such as solar batteries, charged exclusively by your solar PV panels. It also covers storage devices activated in a subsequent tax year to when the solar energy system is installed. Beginning on January 1, 2023, stand-alone energy storage that doesn’t charge exclusively by solar panels will qualify for the ITC credit.

  • Labor - Labor costs for the on-site preparation, assembly, or original solar installation are covered. This includes permitting fees, inspection costs, and developer fees.

  • Sales Tax - The credit also covers sales taxes applied to these eligible expenses.

Benefits

Dominion Energy Net Metering Program

Net metering is an electric billing tool that uses the electric grid to “store” excess energy produced by your solar panel system. Under net metering, the energy produced by your solar panels that you don’t use is credited back to you.

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