Federal Solar Tax Credit (Investment Tax Credit – ITC)
1. What is it?
The Federal Solar Tax Credit allows homeowners and businesses to deduct a percentage of their solar installation costs from their federal taxes.
2. Credit Amount:
- 30% of the total system cost, including equipment, labor, and permitting fees (available until 2032).
- Drops to 26% in 2033 and 22% in 2034, unless extended by Congress.
3. Eligibility Requirements:
- Must own the solar energy system (not a lease or PPA).
- The system must be installed on a primary or secondary residence (for residential credits).
- Businesses can also claim the credit for commercial installations.
4. How to Claim:
- Use IRS Form 5695 when filing federal income taxes.
- The credit can be carried forward if your tax liability is lower than the credit amount in the first year.
South Carolina State Solar Tax Credit
1. What is it?
South Carolina offers a state solar tax credit that is separate from the federal ITC.
2. Credit Amount:
- 25% of the system cost.
- The total credit is capped at $35,000 per system.
3. Eligibility Requirements:
- The system must be installed on a property located in South Carolina.
- Must be a solar energy system for electricity generation or water heating.
- Available for residential and commercial installations.
4. Claiming the Credit:
- Use South Carolina Form SC1040TC (Solar Energy Tax Credit).
- The credit can be applied to state tax liabilities over 10 years if the full credit isn’t used in the first year.
Key Combined Benefits
- Stackable Credits: You can claim both the federal and state tax credits, significantly reducing the cost of installation.
- Example: For a $30,000 solar system:
- Federal ITC: $9,000 (30%)
- South Carolina Tax Credit: $7,500 (25%)
- Total Credits: $16,500, reducing the effective cost to $13,500.
- Example: For a $30,000 solar system:
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Additional Savings: Combine these credits with other incentives such as utility rebates or net metering policies offered by South Carolina utility companies.
