What is the Investment Tax Credit?

The federal investment tax credit (ITC) allows eligible solar adopters to claim as much as 30% of the total installed cost of their system on their federal tax returns. **

Can I Claim the Solar ITC?

  • If you own a new solar system (or qualifying energy storage device) that is “placed in service” during the eligible period, you may claim the credit.
  • For commercial, business-oriented or utility-scale systems, different rules apply: they may still qualify if they begin construction by certain deadlines (for example construction begins by mid-2026 and the system goes into service within a set timeframe).
  • Systems acquired through a lease or power purchase agreement (PPA) generally do not allow the homeowner to claim the credit — the system owner / provider must claim it.
  • Note: Not every customer will qualify. Always discuss your specific tax situation with a qualified tax advisor.

Which Solar Expenses Qualify?

  • Solar photovoltaic (PV) panels
  • Solar battery storage systems of at least 3 kWh (when paired with solar)
  • Solar water heaters
  • Installation costs including mounts, wiring, conduit, labor
  • Permit and inspection fees
  • Applicable sales taxes on qualified equipment
  • Other system-specific costs that are an integral part of the solar energy system.

What Costs Aren’t Eligible?

The following are typically not eligible for the ITC:

  • Improvements which are not directly part of the solar energy generation system (e.g., structural upgrades, conventional roof replacement, tree removal).
    • However, some projects may be covered under the Energy Efficient Home Improvement Credit, which can be claimed on the same tax form.
  • Routine maintenance, monitoring services, cleaning, repairs or system removal.
  • Financing-related costs (loan origination fees, interest on system loans) are excluded.
  • Property taxes themselves — while Illinois offers separate property-tax rules for solar systems, the ITC is not applied to property tax payments.
    • Illinois allows taxpayers to request a special assessment which can exempt property value added by a the addition of a solar system from property taxes, as per Public Act 100-0781. If you claim the solar property tax exemption, there will be no solar-related amount to credit against.

Important Deadline and Transition Details

⚠️ Critical Updates:

  • No longer Federal Incentives for Residential as of 12.31.25
  • Remains through 2026 for Commercial

Residential (ends 12/31/25):

  • Homeowners must have their solar system installed and operational by December 31, 2025 to claim the full 30% federal tax credit.
  • After that date, the credit may no longer be available for new residential systems under current law.

Commercial (continues through 2026):

  • Business/commercial/utility-scale solar systems have extended eligibility.
  • They can still qualify if construction begins by specified deadlines (such as July 4, 2026) and the system goes into service within a set timeframe, following different “safe harbor” rules.

What if My Tax Liability is Less Than the Credit Amount?

  • The ITC is a non-refundable credit. That means it can reduce your federal tax owed to zero, but you will not receive a refund for any unused portion of the credit.
  • However, if you do not use the full credit in the year of installation, in many cases the unused portion can be carried forward to future tax years (subject to IRS guidance).
  • Because the legislation around the ITC is evolving, it’s wise to verify carry-forward rules with your tax advisor.

How Do I Claim The Solar Tax Credit?

  • As a Sun Collectors customer, our team will assist you in gathering the required documentation and guiding you through the tax-filing process.
  • Homeowners: File IRS Form 5695 (Residential Energy Credits) to claim the credit.
  • Businesses: File IRS Form 3468 (Investment Credit) or other applicable forms for commercial projects.
  • Make sure your system meets eligibility requirements and deadlines in the year you install and place it into service.
  • You can reach out to your solar consultant directly, contact us online or call (309) 323-8260 if you have questions or need help.

Why Act Now?

Because of the current legislation (specifically the “One Big Beautiful Bill” and related amendments) the full 30% credit for residential solar ends after 2025 — delaying your installation could mean missing out on a very significant savings opportunity.

** Not all customers are eligible for the FITC.