The Solar Federal Tax Credit Stepdown - News for 2020

The Federal Tax Credit was created to incentivize both residential and commercial solar installations. The Energy Policy Act of 20051 created a 30% tax credit for residential and commercial solar installations.

Starting in 2020, the federal tax credit will step down until it ends in 2022.2

  • 2020 – Tax credit steps down to 26% for home solar systems
  • 2021 – Tax credit steps down to 22% for home solar systems
  • 2022 – Tax credit ends for home solar systems

This article provides general information about the federal tax credit. Sunnova does not provide tax advice, and this article should not take the place of talking to a qualified tax professional. You may be eligible for a federal tax credit with the purchase (loan or finance agreement) of a home solar system. To receive the full tax credit, you must have federal income tax liability at least equal to the value of the tax credit. Additional tax credits may also be available for homeowners in certain states and territories. Sunnova makes no guarantees regarding eligibility for tax benefits.

What is a Federal Tax Credit?

A tax credit is an amount of money that can be subtracted from the taxes you owe the federal government. Tax credits are a dollar-for-dollar reduction in the actual amount of taxes owed.3

To Qualify for the Federal Tax Credit

You must have enough tax liability to take advantage of the tax credit incentive. If you can’t use your entire solar tax credit in the first year, you can roll remaining credits over to future years. However, it is unclear if the solar tax credit can be claimed after it expires in 2022.4

To qualify for the tax credit, you must purchase your home solar system through a cash payment, loan, or finance agreement. Home solar systems with a lease or Power Purchase Agreement (PPA) are not eligible for the tax credit.

It’s important to note that your home solar system must be placed in-service before you can claim the tax credit.5

To claim the tax credit, you will need to complete IRS form 5695 and include the results of that form on IRS Form 1040. A tax professional can help you complete these forms.

Why Wait to Go Solar?

The cost to install a home solar system has dropped by more than 70% over the last decade.6 Why wait to go solar when you can get an affordable home solar system and maximize your potential federal tax credit?

Ask us about adding battery storage! You may be eligible for the tax credit, as well as additional state or local incentives.


4. Turbotax
7. Refer to your Warranty Agreement for complete warranty terms and limitations. Proactive system monitoring and production guarantee is not available in all markets.