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 residential systems, the crucial deadline is: your system must be installed and operational [by December 31, 2025] in order to claim the full 30%.
- 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).
- 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
- For residential installations: To qualify for the full 30% credit, your system must be placed in service by December 31, 2025. After that date the credit may no longer be available for new residential systems under current law.
- For business / commercial / utility-scale solar: Some credit eligibility continues if construction begins (or meets “safe harbour” rules) by a specified date (for example by July 4, 2026) and goes into service by another deadline.
- Because the policy landscape is changing and deadlines are firm, timing matters a lot — later installation may mean loss of the full tax credit.
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.
