A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government. The ITC is based on the amount of investment in solar property.
A taxpayer may claim a credit for qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the solar panel installation is completed. If the solar installation is at a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original solar panel installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year.